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What’s Affecting Gold Prices?

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Gold price performance

While geopolitical tensions pushed gold prices above $1,300 per ounce in the middle of September, the momentum has waned since. The geopolitical concerns have subsided to an extent. Moreover, many bright spots have started emerging in the US economy.

More recently, gold prices weakened due to the strong US dollar and the high chances of a Fed interest rate hike in December. The stock markets are also creating higher highs, which is luring investors towards these assets. In addition, the hopes of tax reform have increased investors’ appetite for risk assets, which in turn is negative for the gold price outlook.

Between GLD and GDX

YTD (year-to-date), gold prices (GLD) have risen ~10.5% as of November 7, 2017. The VanEck Vectors Gold Miners ETF (GDX), on the other hand, has not kept pace with gold prices. It has just risen 8.7%. Usually, gold miners are a leveraged play on the prices. In 2016, gold prices rose 8%, while GDX surged 54%. This anomaly is mostly due to the company-specific factors playing a larger role in miners’ stock price movements compared with precious metal movements.

IAMGOLD (IAG), Gold Fields (GFI), Kinross Gold (KGC), Franco-Nevada (FNV), and Royal Gold (RGLD) have been the best performers in 2017 YTD.

In this series

There are many factors that impact gold prices. In this series, we’ll explore variables such as the US economic growth and inflation outlook, the US dollar outlook, the Fed’s expected path going forward, traders’ positioning, the appeal of alternative assets, and the physical gold demand.

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