JOHANNESBURG (miningweekly.com) – Marking 2016 a “roller-coaster year”, World Gold Council (WGC) market intelligence head Alistair Hewitt noted that the gold price would finish the year up almost 10% from the start of the year.
In July, the gold price breached $1 350/oz, up almost 30% since January, rising at its fastest pace since 1980. Amid growing financial and geopolitical uncertainty, institutional inflows into gold-backed exchange-traded funds exceeded those of 2009, the height of the great recession.
“Negative interest rates, a perception that monetary policy options had been exhausted and increasingly fractious politics contributed to exceptional market uncertainty,” Hewitt pointed out.
However, an abrupt change in market sentiment saw the gold price falling in November, with a surprise victory by President-elect Donald Trump heralding a sudden reversal in investor sentiment, despite having been widely expected to be price-supportive, and a surge in financial markets’ risk-on appetite.
Nevertheless, the gold price is still up almost 10% year-to-date and has been one of the year’s best-performing assets.
The sharp rise in the gold price in the first six months of the year, as well as subsequent volatility in key markets’ local prices, impacted on consumer demand, which fell to its lowest level since 2009. Some country-specific factors played a role too, such as the Indian government’s clamp-down on unaccounted wealth, which had a knock-on effect on gold demand.
Hewitt highlighted that some of the themes present this year were likely to remain in 2017. “Heightened uncertainty will be an issue in Europe, which faces a busy political calendar with elections in the Netherlands, France and Germany, and, in the US, a new President will enter office. Investors will be watching these events closely.”