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Is Gold Ready to Fly in the New Year?

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Dec. 31 2018, Updated 3:14 p.m. ET

Gold’s performance this year

This year, gold prices (GLD) had fallen 3.2% as of December 26. Whereas this performance may seem dismal in absolute terms, gold’s turnaround since hitting its annual low in August has been remarkable—it has risen 7.8% since then. The catalysts of this trend reversal are obvious: equity markets have been extremely volatile since October, with December being especially bad.

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Factors impacting gold

The strong US dollar (UUP), which has gained even more with the US-China trade dispute, has been negative for gold, as were the Fed’s rate hike and hawkish outlook. US economic growth in the labor and consumer markets has remained strong, and equity markets (SPY) (DIA) were strong until October, denting gold’s safe-haven appeal.

Most gold miners have fallen this year due to weaker gold prices. Among major miners, AngloGold Ashanti (AU) and Royal Gold (RGLD) have been the only stocks to have risen, by 21.3% and 0.8%, respectively. Barrick Gold (ABX), Newmont Mining (NEM), and Harmony Gold (HMY) have fallen 5.7%, 8.0%, and 7.5%, respectively, but have outperformed the VanEck Vectors Gold Miners ETF (GDX), which has fallen 11.3%.

Is gold ready to fly?

As 2018 draws to a close, investors may be wondering what awaits gold in 2019. Many traders and investors are anticipating gold’s seasonal price rally, which usually starts in late December and continues into the first quarter of the next year. Gold prices have rallied at this time in five of the past six years.

In this series, we’ll look at what could influence gold demand as we step into 2019. We’ll start by looking at the Fed’s rate hike outlook and how that could impact gold prices.

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