Precious metals such as Gold are one of the most important investment options these days. Gold is the category most people like to work on to diversify their portfolio and to decrease the risk involved. 2017 has proven to be a year full of fluctuations for the gold prices in USA and Gold prices in Pakistan. The uncertainty in the gold market continues as the dollar depreciates further.Gold prices in USA started the week at $ 1229/ounce and ended the week at $ 1248/ounce.Gold prices in Pakistan started the week at Rs 50500/tola and ended the week at Rs 50900/ounce.Following are the factors to consider while studying the fluctuation in the gold prices in USA and Gold prices in Pakistan:
Further Decrease in Dollar value
The power of Trump to have an influence on the American economy seems questionable after the failure of passing a reform on health care. Other promises like the tax cuts are also seen questionable by the people. The gold prices in USA and gold prices in Pakistan are kicked up after the deprecation of the American dollar. The old inverse relationship of gold with US Dollar continues in 2017. Moreover, Trump announced investment of 3 trillion dollars in infrastructure which seems like a huge amount but according to speculations this announcement will not be of much use as the healthcare bill and building a wall failed to pass. The value of dollar may fall even more in prevailing uncertain situation.
With the unpredictable conditions prevailing under Trump, there is an increased demand for gold. The increased demand is set off as people want to hedge the uncertainty through gold. The global need for buying more gold has rose which is due to fear of US Dollar depreciating further under Trump government.
Depreciation of world currency
Economists believe that the world currency will fall in the long run. However, in the short run- world currency is appreciating as compared to US Dollar which may cause gold prices to hike up even more.
Uncertainty also prevails which is causing the fluctuations as the bill for tax cuts is expected to pass sooner or later. Tax cuts will stimulate economic growth which in turn means stronger economy. Consequently stronger economy results in a stronger currency which will push the gold prices downward back again.
The political uncertainty and US economy performance are two important factors who will affect gold prices in upcoming days. Moreover, the fed predicts a three-time increase in world interest rate which means the price of gold will eventually fall as soon as the interest rate goes up and other alternatives are a stronger choice as compared to gold. Uncertainty and fluctuations in gold prices will follow this interest rate increase.
An intelligent investor buys at a low price and sells at a high price. Current time is very good time for investors to earn short term gains by offloading their gold investments as gold prices in USA may go down after tax cuts and economic packages.