2015 was another low for gold, with prices falling by about 12% and extending the score to 3 straight years of losses in rates. In fact the gold rates at the end of the year were almost the same as those in 2008! The big question now is – will gold perform better this time around?
Gold price movement in India in 2016
The general view is that prices will move downward in 2016 also. 2015 was a pretty eventful year, with ample events taking place which historically have propelled gold rates up. For instance, the peaking of war in the middle east, Chinese stock market crashes and general instability in terms of geopolitics and financial markets worldwide. These events, which should have increased the attraction of gold as a safe investment, didn’t spur rates and gold prices dropped just as other commodities did.
As for early indications from 2016, the stock market crashes of January 2016 should ideally have spurred rates. However, rates were more or less subdued all over the world and Indian markets performed a little better owing to the recurring heavy demand from jewellers to meet the domestic wedding season sales. As such, gold may not have a very bright future in 2016.
What are the major indications of price changes?
Analyst projections have pegged gold rates per ounce at around $1,000 in the global markets. While some estimates go as far as $1,200, most of the financial institutions are expecting gold to stay around $1,000 by the end of the year.
December 2015 saw the Federal Reserve hike rates for the first time in more than a decade. Dollar consequently became stronger and this put a downward stress on rates. However, a stronger dollar also translates to weaker domestic currencies around the world, which in turn provides a buffer to falling gold rates in domestic currencies. An example of this would be the case of Australia, where gold prices appreciated in the last year as its currency movement has a major dependency on commodity prices.
Meanwhile the mining industry can spur rates up if they restrict production so as help gold regain some of the lost value. Recent streaming deals by major miners may give them the reason to think about long term effects which their output decisions may bring.
So, what’s the verdict?
Gold has cumulative shed more than 1/3rd of its value in the past 10 years. This might incite some investors to capitalize on the low rates now so that they can profit later. This is advisable if you are going to hold the metal for a long term as prices rose for more than a decade before peaking in mid-2000s. As such the price drops may be expected to extend for some more time before the movement goes in upward direction. Seeing that gold has been losing value for more than 3 years now, there is still scope for bottoming of rates. You should always consult with a financial advisor before making investments in gold.
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