Modest Money | Dec 29, 2016 12:24AM ET
Gold has been an incredibly interesting asset to watch throughout the year. Early on, when the floor seemed to fall out of the Chinese market and the global market followed, gold climbed. However, starting in July, we saw declines as global economic conditions proved to improve. Now, gold is heading back up as investors bet on new year declines. Below, we’ll talk about why investors are betting on declines in the new year, what this has to do with gold, and what to watch ahead.
This year has been very interesting in the market. In particular, December has been overwhelmingly interesting. Historically, December has been a month known for market declines. It’s the point at which investors cash in on gains for the year and prepare for the year ahead. However, that’s not what we’ve seen this year. In fact, this December has been a month of gains with many indices around the world nearing or breaking records. The reason for this is three-fold…
At the end of the day, gold has historically been viewed as a safe haven investment. This means that when we see declines in the market, we tend to see gains in gold. That’s because when the market declines, investors look to gold as a way to keep their money safe. As a result, gold sees increased demand and higher prices.
Moving forward, there’s no doubt in my mind that we’re going to see further gains in gold. Chances are that we are going to see slow and stead growth throughout the rest of the year and as we move into next year, things will likely speed up. However, as you know, anything can happen in the market. With that said, there are a couple of things you’ll want to watch for. First and foremost, keep a close eye on moves that Trump makes as he transitions into office. Also, keep a close eye on the Brexit news. Any changes in the Brexit story could lead to big movement in gold. Finally, watch oil closely. At the moment, I believe it is overvalued. As it falls in the beginning of the year, gold will likely rise.
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