Gold has best year since 2010 with near 14% gain in 2017
Following Trump’s election there had been high hopes for the price of gold. After all, here was a man who had been elected without political experience and on the back of creating social and economic divisions. However, following Trump’s inauguration there was a post-election sell-off at the start of the year. Many were clearly feeling positive about Trump’s impact on both the domestic and international stage.
As various unexpected scenarios played out, from failure to get much done in the White House to sober-rattling with North Korea, the precious metal began to climb. Towards the end of summer, in early-September the gold price hit a year-high of $1346/oz. It then quickly sold off.
Whilst the yellow metal finished the year with a respectable run of gains, the final figures did not match those of say, the S&P 500, which climbed by over 19% in the same year.
It is safe to say that in 2018 gold will be sent significantly higher thanks to ongoing US dollar weakness, higher debt and deficits, stronger growth combined with potential wage inflation, coming together in a perfect storm with geopolitical risks.
One of the key reasons for gold’s 14% climb in USD terms is thanks to the weakness in the U.S. dollar itself. There was a strong correlation between the gold price and the greenback in 2017. It’s also worth mentioning that the level of yield of the inflation-protected 10-year Treasuries at the end of the year was similar to the level at the beginning of the year (about 0.5 percent). People do not want the global reserve currency anymore.
2018: Will it hold its own against the last two years?
2017 showed us that there is still a show to be played out by governments and central banks. There is still a farce to be seen when it comes to reassuring us about the state of the global economy.
Gold’s price rise and the dollar’s weakness shows that there are question marks over this recovery. Gold may be indicating the reality that very little has changed since the financial crisis. Any ‘fixes’ have been done with a bit of sellotape and little else. We build over the cracks rather than repair them.
Gold investors were rewarded this year for their patience. This is particularly the case given there is seemingly little difference to where we find ourselves today compared to the last two years. Arguably the world is much more uncertain.
The year 2018 is a year not to take chances and to own physical, allocated an segregated gold. The risks in the system are bigger than ever and investors would be wise to take all measures to protect their wealth.