Why Gold remain bearish in 2017?

UNITED STATES December 16 2016 11:27 AM

NEW YORK (Scrap Register): Gold tumbled to a 10-month low as the euro slid to a 14-year low against the U.S. dollar, and commodity brokerage SP Angel said “it’s going to be a bumpy road for gold next year.”

The Federal Reserve hiked U.S. interest rates by 25 basis points Wednesday, as expected, but other Fed commentary was deemed more hawkish than most market participants anticipated. 

The danger for gold is that further rate rises through 2017 could hold back normal price appreciation and cause gold to weaken further.

However, the firm also said, physical gold demand may rise as investors in weak-currency regions look to gold, copper and other metals as a hedge against further U.S. dollar appreciation. 

Currency forecasting is notoriously difficult and it may be that the U.S. dollar is already pricing in much of its eventual gain. The flip side is that when the U.S. dollar goes up, it affects currencies around the rest of the world.

China is likely to allow the renminbi to weaken further, and competing nations will need to remain competitive with China. 

“We do not want to predict a rerun of the Asian Crisis but sudden currency collapse is a very real threat, with South Korea looking vulnerable due to political crisis. These last points are good for gold, so we can but forecast greater volatility and a strategy to buy the dips,” said analysts at SP Angel.