Promising Gains for Gold, but Will it Continue?

Published: 26 January, 2016 15:11

In a week looking set to be all about the weakening U.S. dollar and plummeting oil prices, gold futures have regained ground to find themselves back at $1,100–an–ounce level on Monday.

Going Gold

Not entirely unrelated to the weakening greenback, the yellow metal gained 0.8% early this week to reach a high of over $1,105. Though this gain falls short of the $1,108.90 session high, it does continue the upward trend from last week where it gained a half percent. This is particularly promising for the yellow metal in a period where almost every other asset class has fallen victim to increased volatility.

It’s Not All Golden

Gold has been a solid performer throughout January, making early gains and following up with consolidation. This presents something of a turn–around for a commodity that, traditionally, hasn’t been particularly safe to be involved with. That being said, the bigger picture shows something of a negative trend over the past three years, and while gold might provide opportunity right now, the current positive trend should be viewed with some caution.

In keeping with that cautious tone, it has been suggested by some online commodity traders that gold’s rise is actually less than it should have been given the market conditions at present. One reason for this may be that gold is typically treated as an inflation hedge, but there is not currently an inflation issue and it doesn’t look like there will be for some time.

The U.S.

Much is being said of the current state of the U.S. dollar and interest–rate increases by the Fed. Should a slower pace of interest–rates be established, the dollar could weaken as a result and make commodities that are priced in it a much more attractive prospect to buyers trading in other currencies.

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