Gold Looks Set for Continued Rally
Since gold1 is frequently the investment choice for those who are too cautious to invest in regular stocks or other assets, the price of it often holds steady. This year, the commodity rallied. According to some analysts, gold’s recent rally could continue.
The Recent Rise
Gold rose steadily during this year’s economic melancholy. Estimates show that gold has risen by about 20 percent in 2016 so far. When share prices dropped at the start of January and crude oil continued to fall, gold rose. It continues to attract investor interest even as shares and oil prices become more tempting following their recent rebound.
There has been speculation that gold would start to wither once the market evened out and investors turned their attention back to wondering whether the Federal Reserve would once again consider raising interest rates. In fact, the conventional financial press is currently reporting that gold is in dire straits for the near future, but their reporting may be another sign of gold continuing its rally since there are those who believe that playable rallies should be distrusted when they’re in the initial stages.
In several emerging market currencies, gold has reached new highs, but even in developed market currencies, gold’s performance continues to deviate significantly from the amount that’s showing in United States Dollar, or USD, terms.
In reviewing developed market commodity currencies like the Australian and Canadian dollars, gold reached its low point in mid-2013. More recently, gold has rebounded in these currencies. Major turning points often arrive initially when stocks gain strength. Later, the commodity will see a rise in prices. For those who are in search of investment advice, don’t fixate too much on the indexes since there are major sector disparities.
A Cautious Tone
Recently, the U.S. central bank expressed caution by lowering its previous interest rate prospects from four rate increases this year to just two. A rapidly recovering dollar may signal a lower price for gold. If the Fed does increase interest rates, then the higher cost for borrowing could dampen investor interest in gold since the commodity doesn’t pay interest or provide returns like equities and bonds do.
In considering a fundamental perspective, some analysts concede gold’s upside potential. The head of research for Accendo Markets, Mike van Dulken, said, “Gold had its best month in a year in January, which is hardly surprising given its safe-haven job description. While some will say that rising U.S. rates will keep the pressure on gold, the yellow metal is still looking oversold at the moment, and the actual outlook for U.S. rates is rather dovish. Note the surge in USD strength after the Bank of Japan cut Japan’s interest rates to negative, which could weigh in for the shorter term.”
Money and hedge fund managers certainly give the impression that they agree with gold’s bright outlook. On average, these investors increased their bullish wagers on gold traded through the Comex market to reach a 12-week high.
Drops on the Horizon
Other analysts2 believe that gold is facing a continuous sequence of lows before its ultimate rise. According to some reports, these drops may even reach double-bottoms such as the ones that occurred in August and January. When it comes to the overall bear market, industry experts predict that it will continue into 2017. If it does, it will become a progressive shift unlike the 2008 bear market. Some are predicting a drop in June with an interceding top in early April. Gold may appear to be in a danger zone toward the middle and end of April when the first major selloff happens.
The First Ripple
Gold’s earlier upswing may be the first wave in a major advance for the commodity. When the second wave arrives, it is expected to be lengthy with plenty of volatility. Forecasters report that the market will start to run up to new highs, and this will cause investor excitement mixed with overreaching expectations. Then, in a sudden shift, the market will back off bringing about a slow correction period. Bigger advancements are predicted for the latter half of 2016 as well as into 2017 and even 2018.
Setting Up for a Lengthy Rally
If 2016 becomes a banner year for gold, then the commodity could experience several years of a bull market. Some analysts even predict that the rally could be bigger than the market has seen in the last three or four years. For more information about the possibility of a gold rally, head to the Personal Money Store.