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What Can Investors Expect from Gold Prices in 2018?

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What Can Investors Expect from Gold Prices in 2018? PART 1 OF 10

Gold Prices at a 4-Month Low—Is More Downside Ahead?

Gold prices on a downslide

Gold prices touched an almost four-month low in the first week of December 2017. After breaching $1,300 per ounce in mid-September due to geopolitical tensions, gold prices have mostly been on a downtrend.

Several bright spots have emerged in the US economy. The labor market seems strong, and economic growth appears to be on the upswing. The only key variable eluding the markets right now is inflation, which is eventually expected to pick up.

Gold Prices at a 4-Month Low—Is More Downside Ahead?

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The US Senate passed its version of the tax reform bill, the Tax Cuts and Jobs Act, on December 2, 2017, which acted as a positive catalyst for the US dollar. This action also impacted gold prices negatively.

In mid-December, the Federal Reserve is set to hike interest rates for the third time this year. This move would also be negative for the non-yield-bearing precious metals such as gold.

Between GLD and GDX

Year-to-date, gold prices (GLD) have gained 9.8% through December 5, 2017. The VanEck Vectors Gold Miners ETF (GDX), on the other hand, has not kept pace with gold prices. GDX has returned just 5.0%.

While gold miners are a leveraged play on prices, this situation has not played out in 2017. This is mostly due to company-specific factors playing a larger role in miners’ stock price movements compared with precious metal movements.

Gold Fields (GFI), IamGold (IAG), Franco-Nevada (FNV), Kinross Gold (KGC), and Royal Gold (RGLD) have been the best performers in 2017 with year-to-date gains of 22.5%, 28.5%, 18.5%, and 26.0%, respectively.

Series preview

In this series, we’ll discuss the factors that impact gold prices. These coincidental and leading factors can help gauge the future outlook for gold prices.

These factors include economic growth indicators in the US, the inflation outlook, the Fed’s rate hike expectations, the outlook for the US dollar, and the appeal of alternative assets such as equities and bitcoin.

We’ll also discuss the physical demand for gold. We’ll conclude this series by summarizing the outlook for these factors and what they mean for gold’s outlook in 2018.

In the next part of this series, we’ll look at the ongoing debate of gold versus bitcoin and how the sharp rise of bitcoin is impacting gold prices.

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