Gold Prices Today: Where Is Gold Heading? Metals journalist, John Mitchell, talks to Senior bullion dealer at Gold Investments, Oliver Temple, about his thoughts on gold prices so far this year and his predictions for the rest of the year.
Oliver, hi. Can you begin by explaining the performance of gold this year?
Hi, John. Yes sure. Global gold demand for Quarter 1 of 2017 was 1,034.5t. This is down compared with the same period in 2016 which was a strong first quarter.
What we have been seeing during 2017 is a slowing uptake in gold purchases from central banks. Between 2010 and 2014 there was a 14% increase from central banks buying gold.
It’s not unexpected that their demand would start levelling off.
There are several reasons why central banks buy gold. Some want to diversify their own portfolios. Other central banks are purchasing the metal to hedge their tail risks or because of gold’s inflation-hedging characteristics (gold has a long history of maintaining its purchasing power).
These will be having an effect on prices. We’ve seen gold prices falling dramatically particularly in the last few weeks – why is this?
One of the biggest factors affecting gold in recent times has been how strong the US dollar is. In my article last week, I reported that the US is expected to increase rates gradually and slowly.
Increasing rates are signs of confidence in an economy. Investors often feel that higher interest rates will give a better return on investment and that’s generally when gold prices drop because of less demand.
So should investors turn away from gold altogether this year?
Some analysts believe that gold prices will tumble for the rest of the year.
Certainly, gold prices have been going through a turbulent time. For us as one of the oldest bullion houses in the UK, we believe that investors should be taking a medium to long-term view.
It can be very risky buying gold and selling quickly.
You don’t see gold prices increasing soon then?
It’s important to remember that gold prices can be affected by many different factors. China, for instance, are the largest consumers of gold. What’s happening there, although it’s still not entirely clear, is that the Chinese Government is shutting down unproductive mines.
In quarter 1, production of gold in China fell to 111.6 tonnes.
China’s thirst for gold has not gone away so it’s likely they will still start importing the metal – which could affect gold prices globally.
Indian consumers have actually increased their spending on gold. Sales for Akshaya Tritiya were up by 30.5% compared to a year ago.
What we need to watch is developments in North Korea.
Rising tensions there could have a bearing on global markets, and gold prices.
Moody’s Investors Service have said the increased probability of conflict will be credit negative for Seoul. South Korea currently has an ‘AA2’ rating but that assessment could change.
What about Brexit?
Brussels announced today (Thursday) that the Eurozone economy is gaining strength. This is in part due to better global economic conditions. The stronger US economy is helping as well.
The UK’s own economy, though, has slowed in the last few months. The Bank of England governor, Mark Carney, has warned that consumer spending which has been driving our own economy is being squeeze.
The bank has revised their figures for 2017 from 2% to 1.9%. Interest rates are still be held at 0.25%.
No one knows the actual impact of cutting ties from Europe. Markets like stability and investors could well be looking more towards commodities such as gold to protect their assets if there is volatility.
Now could be the best to buy gold then?
It’s up to individual investors. We’re always happy to draw on own expertise and experiences. What we do advise is to sign up for our free price alerts and to keep an eye on our second-by-second live prices
How do first time investors go about it purchasing gold?
Chat to us first. We’ve offices near Leadenhall Market in The City. We can also be reached on:
Tel: 020 7283 7752
Fax: 020 7283 7754
Email: [email protected]
Investors are welcome to look at our website as well. We’re happy to pass on our knowledge – we’ve been trading in gold since 1981. It’s also worth pointing out the gold is exempt from VAT and Capital Gains Tax. You don’t have to be rich to invest in the metal either.
Can I just say we also have some of the cheapest quality gold and secure storage facilities.
Oliver, thank you for your time.
Thank you, John.
John Mitchell specialises in the metals and financial markets. His work has appeared across many well known publications and websites.