Gold Caught Between Trump and India

It was supposed to be a good year for gold, given all the uncertainty and surprises over the U.S. presidential election, the British vote to leave the European Union and general concern about the health of the global economy.

But things didn’t quite pan out the way gold bulls would have hoped, and now they face a new year where the price of the precious metal is likely to be hostage to developments that are inherently unpredictable.

The two main risks for the gold outlook for 2017 are what actually happens in the presidency of Donald Trump and how the demonetization of Indian Prime Minister Narendra Modi plays out in the world’s second-largest consumer of the precious metal.

Gold certainly enjoyed a strong first half in 2016, with the spot price gaining almost 30 percent between the end of last year and the intraday high this year of $1,374.91 an ounce on July 6.

However, since then it has slid 17.5 percent to the close on Dec. 16 of $1,133.99 an ounce, as investor sentiment swung from gloomy to optimistic that the United States will help lead global growth and reflation.

Much of the newly-found optimism is based on the view that Trump will be able to kickstart the U.S. economy through his plans to spend up to a $1 trillion on infrastructure and other projects.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza