What Do the Indicators Say about Gold’s Price Outlook?



Gold price performance YTD

Gold prices have risen 11.4% year-to-date until August 14 after gaining 8.5% in 2016. While the gold price trend has been volatile in 2017, recent geopolitical tensions and a weaker US dollar have supported gold prices.

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Divergence between GLD and GDX

While an increase in gold prices is usually followed by an even greater increase in gold miners, due to the leverage of these miners, this hasn’t been the case in 2017. 

The VanEck Vectors Gold Miners ETF (GDX) has risen just 9.3% despite an 11.4% increase in the SPDR Gold Shares ETF (GLD) year-to-date. This trend is mostly due to companies that are impacted by company-specific factors rather than gold prices in 2017.

Variables impacting gold prices

There are many variables that have impacted gold prices year-to-date. The key variables include the expectations regarding the Federal Reserve’s next rate hike, the weaker US dollar, geopolitical uncertainties, and the deterioration of President Trump’s economic agenda. The Fed has increased interest rates twice in 2017, which usually has a negative impact on gold prices. The weaker US dollar, on the other hand, has been supporting gold prices in 2017. 

Also, the demand for physical gold remained strong, especially in China and India. In this series, we’ll see how these factors are progressing and how the outlook stacks up. This can also give a clue regarding the direction of gold prices.

The chart above shows the stock performance of precious metal miners year-to-date. As you can see in the graph above, out of the major precious metal miners (SIL) (GDX), Iamgold (IAG), Royal Gold (RGLD), Gold Fields (GFI), and Kinross Gold (KGC) have risen the most, increasing 41.3%, 36.6%, 36.0%, and 33.3%, respectively.


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