The first month of the New Year has come and gone and investors are still holding on to gold despite minor losses. The safe haven metal continues to be popular as many are still waiting to hear decisions on tax reform, trade and economic policies as well as the Federal Reserve’s interest rate increase.
February Outlook and Beyond
February will most likely still be a good time to purchase and hold gold. While gold is not expected to continue on the upward path it has been on for about the last eight weeks, it will continue to be a valuable part of risk-averse portfolios.
Going forward with the rest of the year, however, the U.S. market definitely expects an interest rate increase from the Fed. The timing and magnitude of the increase is still unknown, leaving gold relatively stable. Rate increases alongside other factors bolstering a stronger dollar, like protectionist trade policies, could leave gold in a significant decline for at least part of 2017.
When Do We Expect Announcements on Economic Policies?
We can’t know for certain when announcements and decisions will be made, but the expected timeframe is around March. February is a great time to be long in gold as talks of raising the debt ceiling versus reducing national debt are coming shortly after the end of this month.
Many investors could continue to turn to gold to hedge against higher risk investments to quell their fears about the future until more announcements are made after February.
International Influences
Gold prices in Euros are likely to pull ahead of USD-backed gold investments in the coming months. The European Central Bank is likely to be slow moving on interest rate increases as it is trying to balance the needs of member states with stronger economies like Germany and those with sluggish economies in the south of Europe.
The slowdown in purchasing in India due to a new law limiting the amount of physical gold a person can own could also greatly alter global demand for the yellow metal. Additionally, it could disrupt production if demand hits a critically low level.
All in all, February is likely to be a waiting game where gold is concerned.
