Gold price prospects depend on US rates and the dollar

Subject

Gold price prospects.

Significance

Gold has enjoyed a modest recovery this year. Investors have been attracted to its safe haven qualities amid signs that enthusiasm for the shift to reflationary US policies is waning. Gold prices fell towards the end of 2016 as the dollar surged, reinforced by Donald Trump's surprise election and the first Federal Reserve (Fed) rate rise in a year. However, rising prices during January-July meant gold prices still rose by nearly 10% in 2016, reflecting renewed investor interest in developed markets and increased caution towards emerging markets.

Impacts

• The London Metal Exchange will launch gold contracts in 2017 for the first time since 1980, competing with local over-the-counter markets.
• Deutsche Bank is accused of manipulating gold prices from 2004-13 and will pay 60 million dollars to settle private antitrust litigation.
• The Fed’s independence may be questioned, threatening monetary stability and raising interest in other assets, including gold.