What Is the US Economy’s Role in Determining Gold Prices?



US concerns

The US dollar gained some ground after plummeting to two-week levels as the newly elected president entered the White House. Donald Trump has announced policies that have bolstered his protectionist outlook. Trump indicated that he would withdraw the US from the Trans-Pacific Partnership, which would impose a hefty border tax on products coming from overseas American factories.

[marketrealist-chart id=1878797]

Article continues below advertisement

The geopolitical and financial turmoil in US markets often helps the haven appeal of precious metals like gold. Investors often seek out gold during uncertain times. Gold surged to its highest level since November 22, 2016, when investors awaited further clues on the United States’s economic performance.

The funds that closely track the performance of gold and silver include the iShares Gold Trust ETF (IAU) and the iShares Silver Trust ETF (SLV).

Mining stocks recovered

As precious metals had recovered in the new year, so did mining stocks. Mining stocks Pan American Silver (PAAS), Franco-Nevada Corp. (FNV), Randgold Resources (GOLD), and Yamana Gold (AUY) all saw their prices rise. These four mining shares together contribute ~11.6% of the fluctuations in the VanEck Vectors Gold Miners ETF (GDX).

Analysts are likely hoping for further clarity regarding the economic policies that Trump may pursue. The details on tax and spending policies that could impact the growth of the country are crucial in determining the future price of gold. The direction that US interest rates could take also holds considerable importance for these precious metals and the mining companies.


More From Market Realist