Until two days ago, the outlook for gold wasn’t looking good. In the wake of the United States presidential election and the world awaiting President-elect Trump’s inauguration, the market has moved heavily to higher-risk investments. As most investors know, gold is considered a low risk investment, but it has been hit hard since November. However, Christmas came right on time this year for gold investors. A few days ago gold prices rose for three consecutive days, providing a sunnier outlook.
Many investors in the past year began to turn to gold in fear of another global financial crisis. By investing in something tangible with lasting value, traders felt safe holding onto gold for as long as they needed. Now that interest rates are rising and the market is in favor of the pending political change, gold saw a dip in activity. However, those investors reluctant to trade their gold investments for riskier stocks may find a reward this time next year.
Predicting Gold – There’s No Crystal Ball
Prior to the election results, some leading analysts projected a 10% bump in gold prices if Donald Trump won the presidency. Experts suggested that the ambiguous nature of his policies and imminent rise in inflation would help gold investors see their returns before the end of 2017.
Not surprisingly, no one really saw this trend coming. With the world’s economy on shaky ground, political clashes abroad and uncertainty for the future of trade in the United States, investors were cautious when it came to taking risks. Now that the future has become slightly clearer, investors are ready to get their feet wet again. Now, no one is taking a cannonball into the water and abandoning investments like gold, but the diversification into stocks is in the works.
Where Gold is Going
Again, there is no crystal ball. Some analysts predicted sharp rises after the election results, while the reality was a decline until just a few days ago. One thing is sure though: gold is meant to be a long-term investment. It provides stability in a portfolio, especially those that invest in emerging markets or small cap stocks. A combination of uncorrelated or inversely correlated financial investments allow for a lower risk, diversified investment portfolio.
Ending the year on a high note, gold is positioned to prosper in 2017 as finalized policies on international trade and production approach.
