There has been massive confusion in the precious metal market from the very beginning of 2016. Due to lots of pending economic events, investors in the gold market suffered a lot. The Fed was supposed to hike interest rates at the beginning of 2016, but due to constant poor performance from the U.S. economy, they were forced to delay the rate hike. However, things dramatically changed in the global market during the presidential election held on November 8th, 2016.
Mr. Trump became the newly elected president and shocked the whole world. Investors were fearful as Mr. Trump has anti-social and trade policy in the market. However, during his victory speech, Mr. Trump declared that the fiscal spending of the government and tax cut policy will be incorporated into the U.S. economy system from the very beginning of the next year.
Such an optimistic statement gave the dollar a strong boost against its major rivals in the Forex market and ultimately pushed the price of gold lower in the market. After that, the U.S economy did significantly well in the global market and helped the Fed to raise their interest rate on their last FOMC meeting.
The Fed was able to hike their interest rate on the basis of 25 points in the market and give the U.S. index a strong push in the global market and ultimately helped it to secure a 14 year high. Such immense strength in the greenback made gold investors worried about the market price. With such a major release in the market, the price of gold again sharply fell in the global economy towards the major critical support level in the market. To be precise, the gold market was hit hard by the recent strength of the U.S. dollar.
The strength of the U.S. dollar gradually faded away in the market after the dollar index slipped from the 14 year high in the global market. Last Friday, the gold price hardly kicked off from the ground, showing that it’s not ready for further downside movement in the market. However, the price of gold was still trading near the 11 month low as the greenback exhibited its intensive strength in the market.
The price of gold futures for the February delivery went by 0.13% in the global market and resulted at $1132.15 in the market. Currently, the price of gold is trading at a critical level in the global economy since it’s near to the low of 15th December where the price was trading for $1123.90 in the market.
Due to a stronger dollar in the financial market, the February contract ended up with a loss of $0.22 at $1130.70 an ounce. According to a leading economist researcher, the price of gold will find strong support near the $1123.90 in the market and the bullish move will face challenges after it hit the critical resistance level at $1136.10 in the market.
The greenback again gained its strength in the market after the U.S Commerce Department declared that the GDP has gained near about 3.5 in the last three months. The market was expecting 3.2% growth but such positive data again brought the bulls in the gold market.
Though the price of gold gained some bullish momentum in the market, the greenback still remains broadly supported by investors as the Fed plans for three rate hikes in 2017. If the Fed manages to go for a three rate hike plan in the next year, then we will see a large drop in the price of gold, ultimately washing away the bulls in the gold market, creating a new historic low in the price of gold.
There was a sharp fall in the U.S. dollar index last Friday, as the investors started to doubt about the ongoing strength of the U.S. dollar. According to the leading investors, the strength of the U.S. dollar might fade away in the near term future since it will become extremely difficult for the Fed to go for three rate hikes in the next year. After hitting the critical high at 103.62 level in the market then U.S. dollar tumbled down in the market towards the 103.06 level.
Since the price of gold is measured in dollars, a stronger dollar usually results in the dramatic fall of the U.S. dollar. Most of the leading investors in the financial world are thinking that the market has already absorbed the fresh buying pressure of the green bucks and the green bucks might tumble at any moment in the global market due to market sentiment.
The price of silver also slipped in the global market by about 0.21% and traded at $15.838 a troy ounce. The next year is going to play a vital role in the price for the gold price since there is a strong possibility of three rate hike and more over the central the bank will also be pushing the Fed for at least two rate hikes before the month of November.
So if everything remains in order then we will see a historic low in the gold price. But on the event of slight weak economic performance from the U.S. government, we will see a sharp rise in the price of gold. To be precise, most of the investors are staying the sideline and waiting for the bad news release from the U.S. to buy the precious metal.