Gold has been rising continuously since the beginning of this year, although the intraday fluctuations seem rather large scale and the correction phases seem like a full on inversion of the trend. However, the rising channel for gold seems stable. Since January 2016 to date, gold has increased in value by 21.4%; travelling from $1,061.50 to $1,289 for a troy ounce. The potential for a continuation of growth is enough for the long position target to be set at $1,400 per troy ounce buy the end of the year.
The price of gold has been rising steadily for the past two weeks. The market is impressed by the latest upshoot on stock markets and in quotes and so it is ready for a powerful correction. This is increasing interest for gold as an instrument to hedge risks on the one hand. On the other hand, investment in gold is stable and almost without emotional risk, unlike other commodities. This revival of gold purchases has come about due to news of billionaire George Soros starting to invest in companies and shares connected to gold, simultaneously ditching assets which are not connected to the precious metal. The perseverance of problems in China, the risks to the world economy and its problems with sustained growth, European recovery being uneven and the lack of political unity in investing in gold: all the factors are there for a big bang. Moreover, history shows that Soros isn’t often wrong when he wades in upping the stakes.
Investors are making reassessments as to when the US will tighten their monetary policy, shifting expectations from June to July. The market still isn’t sure whether the Fed has it in them to put up rates twice in one year, say, in July and December. Long-term investors are now focussing on two periods of time: July and it’s 40% likelihood of seeing an increase in rates, and September with its 60% likelihood. If it will be September, it’s unlikely that the Fed will make a second rise before the end of the year. All of these doubts are pushing gold up.
Gold has risen almost by 7% in the first two weeks of June. For the moment, a correction on its way up isn’t being considered; only a pause is. Taking into account that oil and other energies seem to be in a rollback phase, investing in gold is all the more looking promising.