Short-Term and Long-Term Outlook for Gold Prices
Gold prices had a rough second half of 2016. Now, as we have entered the new year, investors could be asking where the yellow precious metal is headed in 2017 and beyond.
You see, in the short term, there are a few factors that could send gold prices lower.
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One of the biggest factors that could impact gold prices in the short term is the rhetoric that says gold isn’t worth owning when interest rates go higher. Since the U.S. Federal Reserve has just raised the rates, and it plans to raise them further in 2017, investors could get spooked and sell.
But, if its not the interest rates, the stock markets remaining close to their all-time highs might cause investors to take a little bit of a risk, and rush towards equities. Gold prices perform well when other asset classes are plummeting.
And maybe short-term price action could cause investors to run away from gold. Please look at the chart below and pay close attention to the circled areas.
Chart courtesy of StockCharts.com
The blue line on the chart above represents the 50-day moving average of gold prices. Since September 2016, this moving average has acted as a resistance level. Gold prices are approaching this moving average again and investors could look at this and sell the precious metal.
Regardless of all that’s going on in the gold market in the short term, investors keeping their focus long-term could reap massive rewards. Gold prices may be down in the short term, but not out.
As the precious metal prices remain suppressed, the underlying fundamentals are getting better.
Understand that, despite lower gold, we continue to see buyers. For instance, look at the sales of gold bullion at the United States Mint. In 2016, the mint sold 985,000 ounces of gold in American Eagle coins. (Source: “Bullion Sales,” United States Mint, last accessed January 6, 2017.)
You will not hear about it in the mainstream media, but this was the highest amount of gold sales at the U.S. Mint since 2011, the year when gold prices touched the $1,900/ounce level.
Mint sales may just represent investors buying gold…
Central banks are buying gold as well. They have been buying the precious metal since 2009, and there’s really no sign of them stopping anytime soon.
What’s Next for the Precious Metal in 2017 and Beyond?
Here’s what must be understood clearly: in 2016, gold prices actually increased for the first time since 2012. Between 2013 and 2015, a lot of trust was lost in gold.
With higher precious metal prices in 2016, we could see those who have been on sidelines come in and buy in 2017. This could give a decent boost to gold prices.
With this in mind, it could be a great idea for investors to start paying attention to mining companies. If gold prices increase, investors could see leveraged returns through them.
