Concerning issue for Gold

The positive effects of a year end are seen hovering around the yellow metal at the beginning of 2018 too. Gold held a strong finishing in 2017, up by 13.5 percent according to World Gold Council.  Gold’s annual gain was the largest since 2010, outperforming all major asset classes other than stocks.

Contributing to this gain was a
• Weaker U.S. dollar
• Stock indices hitting new highs
• And geopolitical instability

All of these combined created an atmosphere of geopolitical and economic uncertainty, thus benefiting gold.

The uncertainties haven’t seemed to calm down, and hence gold continues its rally in the first month of the year. Gold continued to gain some positive traction through the early European session and was seen hovering around 4-month tops touched last week.

The US Dollar sank to fresh three-year lows, below the 90.00 round figure mark and was seen benefiting dollar-denominated commodities - like gold.

Meanwhile in the U.S. some risk-aversion trade has eventually provided an additional boost to the precious metal's safe-haven appeal.

With the USD still struggling to gain any respite, the commodity seems all set to build on its bullish momentum and head back towards testing September 2017 highs

While we see gold touching monthly highs, we shouldn’t forget a concerning issues- What if markets collapse? Well, then  it  could suffer collateral damage as institutions and funds struggle for liquidity and have to sell good assets to stay afloat.

A similar situation had surfaced in 2008 when the stock market collapsed, but gold comparatively has recovered faster than equities and since then went to be its strongest bull market ever with prices rising to new heights of over $1900 an ounce

Now that god prices have reached $1350 an ounce, whether it stabilises there, rallies or gets pulled back--- depends on the U.S. dollar and Whether the U.S. market will allow it to stay there.

Gold - A Store of Value

Though gold headed for its first weekly drop in six week, it remained in the positive territory - thanks to U.S uncertainties, Bitcoin crisis, ECB hawkish comments to name a few.

Spot gold has declined 0.5 per cent so far this week, its worst week since early December.

Spot gold was up 0.4 per cent at $1,332 an ounce by 0659 GMT. On Thursday, it touched its weakest level since Jan. 12 at $1,323.70, having fallen from recent four-month highs.

Amid worries of a possible US government shutdown, the dollar weakened and gold strengthened with prices rising higher on Friday. Legislation to stave off an imminent federal government shutdown encountered obstacles in the US Senate late on Thursday, despite the passage of a month-long funding bill by the House of Representatives hours earlier.

Legislation to avoid a US government shutdown at midnight on Friday advanced in Congress, as the House of Representatives on Thursday night approved an extension of federal funds until February 16, although the bill faced uncertain prospects in the Senate.

The dollar has fallen since 2017 largely on expectations central banks besides the Federal Reserve are seeking to end their policy of ultra low, even negative, rates that they adopted to combat the 2008 global financial crisis and the recession that followed.

Furthermore, reacting to ECB’s hawkish language, gold prices rose during Asian morning trading hours. The yellow metal gained momentum as ECB’s December meeting minutes and soft US data weighed on the dollar.

ECB’s December minute were claimed to be hawkish due to a discussion of a gradual shift in guidance from early 2018 - much earlier than had previously discussed.

A disappointing US data lowered the dollar. The dollar index was down by 0.5% at 91.81 as of 11:57 am Shanghais time.

The December Producer price index fell 0.1% against an expected increase of 0.2%
Unemployment claims rose to 261,000 this week. Marking the fourth consecutive weekly increase and a more-than-three- month high.
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As mentioned above, another reason that has favored the rise on gold prices is the much hyped Bitcoin. Is it a bubble or a boom? Bitcoin, the world’s most popular crypt currency, has seen a major correction, losing over 40 percent of its value in less than a month, prompting investors to dump the crypt currency in exchange for the precious metal.

As of this writing, the cryptocurrency, which skyrocketed from below $1,000 in early 2016 to the historic milestone of $20,000 in December 2017, was hovering around $11,600 per a coin, according to CoinDesk. On Wednesday, the price of Bitcoin dropped to $9,400 at one point.

Currently Bitcoin look quite uncertain. It was easy to get into it but now investors are finding it difficult to come out. AS we see that currently with Bitcoin and dollar facing a decline in vale, gold on the other hand ahs rallied 7.5% in the past month and also carries with itself a history of being a safe haven asset and a store of value.