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Top 3 Reasons Gold prices in USA will fall below $ 1000/ounce

Gold prices have showed some improvement in last two weeks. Gold prices in USA crossed the $ 1200 /ounce psychological barrier on 13th January 2017.The recent growth in the gold prices has helped investors to make some profit from their investments. The strong Chinese demand and weak dollar has helped  gold prices to move upwards in last two weeks.But gold market experts believe that recent boom in the gold market is short lived.Gold market will face bad time in the future.They are expecting a long term bearish outlook for the gold prices in USA.Our team agrees with them on this point.Our team believes that gold prices in USA will fall below $ 1000/ounce in the current year. Following are the most important reasons gold prices will fall below $ 100o/ounce in current year.

Expected Interest Rates hikes in 2017

Interest rate hikes play an important role in affecting the gold prices in USA. There is a negative correlation between the gold prices and interest rate hikes. Interest rates hikes make gold less attractive to the investors.Federal reserve has announced its plans to raise its interest rates at least three times in the year 2017.Boston Fed reserve president Eric Rosengren has asked federal reserve to speed up its process of rate hikes.It will help central bank to control inflation and different negative effects of inflation in most effective way possible.He thinks that 2 % inflation target can be easily achieved by this policy.So most of gold market analysts believe that three times increase in interest rates will put more pressure on the gold prices in USA.

Strong US economy

United States of America is the largest consumer market in the world.US economy accounts  for 10% of global trade flows, 20% of global energy demand,22% of global output, 63% of global foreign exchange reserves and over 33% equity market cap. The World Bank has estimated that a Donald trump’s economic package and additional corporate tax cuts would raise GDP by as much as 1.5%.World bank is also expecting a improved growth patterns for  world economy.

Performance  of US and world economy plays an important role in affecting the long term prospects of the global gold market. Especially , Strong US economy will make gold market less attractive to the investors. This will put more pressure on the gold prices in USA.

Strong US Dollar

Foreign currency experts are expecting a weaker performance of  important world currencies like Euro and pound in the year 2017.European and English economies are still facing the aftershocks of the Brexit referendum of June 2016.They need time to  come out of the post-Brexit scenario.US economy is poised to post a strong growth in the year 2017.All indicators are pointing towards a strong US economic growth in 2017.Strong US economy will improve the value and position of US dollar as compared to other basket of world currencies.US dollar index has recently touched its highest level of 103 points since December 2002.There is inverse relationship between the US dollar value and gold prices in USA.So strong US dollar will create more issues  for the gold market in 2017.

 

 

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About Emaad Qureshi