During all the doom and gloom we have recently faced, gold prices have again spiked during big political events. In 2016 we saw the United Kingdom begin the lengthy process of leaving the European Union. In America, quite arguably one of the most influential countries in the world, we saw the election of a controversial new president. In India, we saw drastic currency reforms and new Sharia Laws were passed regarding the investment of gold. But what does this mean for 2017?
Many banks started to make positive claims that gold prices will increase in 2017. HSBC led the way in July 2016 predicting that gold prices could increase to highs of $1400 /oz. and the Bank of America Merrill Lynch even went as far as saying prices could go up to $1500 /oz. As far-fetched as this may seem 2017 has already been set up to be an interesting year.
During the summer, the popular topic which would have been on everyone’s mind and all over the media, was the EU referendum. After 51.9% of the country voted to leave, there was a lot of uncertainty as to how the UK will change. People began to buy Gold, causing a slight increase in prices. It was then speculated that Article 50, the section in the Treaty of Lisbon which details the formal process of leaving the EU, will be triggered in 2017. This may possibly cause another surge in panic buyers securing investments for the future. As we are also currently trading within the EU, there has also been a lot of discussion as to who we will set trade deals with in the future.
United States of America
In November 2016, history was made when the famous Billionaire Donald Trump was elected as the next president of the United States of America. After the initial election, there was a 4% surge in gold prices. As the inauguration of the president-elect falls on the 20th January 2017 it may be possible that the New Year could begin with another surge in gold prices. Many have discussed Trump’s protectionist stance may influence the US economy. We have already seen an increase in interest rates causing the appreciation of the dollar and in turn, reduced gold prices. With a new president entering the White House it will be interesting to see how this will affect gold prices in the long run.
In India Prime Minister Narendra Modi decided to withdraw the 500 and 1000 Rupee notes from circulation. The specific notes, of the Mahatma Gandhi Series, were to stop being used after midnight on the 8th November. In order to exchange the notes to other legal tender, citizens queued for hours on end. This was particularly difficult as ATM’s and banks faced money shortages. Even in this time of panic, it was an interesting turn of events for gold prices in India. With the upcoming wedding season and those wishing to secure investments, the price of gold increased due to citizens rushing to buy while they could use their soon to be banned notes.
This sudden change in currency was the start of the Prime Minister attempting to reduce and eventually stop the circulation of ‘black money’. Black money being the term used for money which is made through the black market and on which no taxes were paid. With the prime minister cracking down on the circulation of ‘black money’, traders have begun to worry he will target gold imports next. This is now causing traders to buy in bulk creating a higher demand in India. As the second-largest gold buyer, citizens may be looking for a safe-haven investment.
Recently there have been changes in the Sharia law with regards to gold and how it is owned. Previously it was acceptable for Muslims to own gold in a physical sense such as jewellery or for gold to be used as a form of currency. However, it is now acceptable for Muslims to own gold as an investment in certain circumstances. Initially gold was a “Ribawi item” under sharia law, to be traded immediately and no allowance for investment purposes. A once grey area now has been cleared up. The only notable setback may be that the gold being bought needs to comply with the Islamic gold standard. As there is now a new target market, 2017 may see a lot of new investors in gold.
Prices of gold improved slightly during 2016, especially within the first 6 months. However, the past year’s gold mine supply has decreased as predicted in correlation to the 2015 gold mine supply. This is due to cutbacks in capital expenditure after 2013 and the 28% gold price decline. It has also been predicted for 2017 that the gold mine supply will continue to decrease slightly. If the supply continues to decrease the prices then prices should increase further especially if all the predictions of 2017 being a good year for gold come true. So, will 2017 be the year of the safe haven investment?
Gold price Predictions?
With the year ending shortly, 2017 looks like it is going to be a busy year. It is apparent that when political situations cause uncertainty within a country people will flock to buy gold as security. With the events of 2016 in mind and the prospects of how 2017 may turn out, it will be interesting to see how this will affect the price of gold.
You can track the gold price on our live charts here to see how world events affect the price of gold and to help you choose the right time for you to invest in gold. Another good page to bookmark is our best value bullion page which gives you a great selection of items that give you move for less.