What Could Lie ahead for Gold and Gold Funds?



Physical market

The demand for precious metals—especially gold—during the past few months has been weak. And as the upcoming Chinese New Year has been pulling in lower demand for gold, the prospects for physical gold markets don’t look spectacular. India, the second-largest gold buying nation, has also reduced its own demand for physical gold.

Although in the shorter run, physical supply and demand figures do not do much to affect the price of the metals themselves, in the longer run, these factors can impact gold fundamentally. Funds flowing to famous gold-based funds like the SPDR Gold Shares (GLD) also saw reductions at the end of 2016, and the lull in gold metal caused investors to withdraw from gold.

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Mining shares bounced back in January

That said, mining shares like the Vaneck Vectors Gold Miners Fund (GDX) have seen substantial price revivals in 2017, after markets recovered from the mid-December rate hike. Specifically, Eldorado Gold (EGO), Alamos Gold (AGI), First Majestic Silver (AG), and Alacer Gold (ASR) recovered in January from their lows in December.

Notably, these companies together contribute about 7.4% of the fluctuations in the Vaneck Vectors Gold Miners Fund (GDX)

For this reason, with the most recent recovery in precious metals, there are further hopes that these metals could rise due to safe-haven calls under the Trump administration. As investors are still skeptical of what lies in wait down the road, suspicion in markets could give air to precious metals going forward.


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