Gold trade is losing its steam these days.Gold prices in USA started the week at $ 11158.30/ounce and ended the week at $ 1135.30/ounce.Gold prices in Pakistan are also following the pattern set by the international factors.Gold prices in Pakistan started the week at Rs 49800/tola and ended the week at Rs 49500/tola. Following are the most important factors affecting the gold prices in USA and gold prices in Pakistan.
Federal Reserve Rate Hike
Gold prices started falling with a very fats rate after the Federal reserve rate hike announcement. Federal reserve increased interest by 0.25 % last week. The gold prices in USA fell from $ 1161 to $ 1127 within a day after the rate hike.Federal reserve has also announced three rate hikes in the 2017.This announcement will put more pressure on the gold prices in the upcoming year.
Strong US dollar,Strong US economy and Gold prices in USA
A strong US dollar represents a strong US economy. It brings lots of benefits to the general public and government. It is beneficial for both economy and the US consumers.Consumer spending showed a growth of 0.3 % in the month of September 2016. But strong US dollar is inversely correlated with the gold prices in USA.
The US dollar index started the week at 101.54 points and ended the week at 103.47 points. The US dollar reached its new peak as compared to Euro and other major currencies. The rise of US dollar was helped by rate hike by the Federal reserve.
The rise of the US dollar was started after the Trump’s election last month.Investors are expecting very positive economic policies from Donald Trump.They believe that its positive economic policies will improve the business environment in the country. They are expecting that his business friendly policies will increase rates of economic growth and inflation.This high economic growth will force Federal reserve to increase interest rates in the next year.
Investors are expecting a very good impact of upcoming economic policies of the Donald Trump.They believe that his policies on regulatory and tax reforms will improve the US economic growth. His policies will also improve the stock market return in 2017.The strength of US economy will improve the positron of US dollar in the International market. The improvement in the US dollar value will put more pressure on Gold prices in USA and Gold Prices in Pakistan.
Federal reserve has gave indication of three more rate hikes in the year 2017.This announcement has badly affected the Gold demand all over the world.So this means that investors will avoid investing in safe haven assets like Gold. Investors are showing great interest in stock markets as capital markets are touching new heights.
After analyzing the above mentioned market factors,it is strongly advised to sell the gold . It is expected that gold prices in USA will hover between $ 1000/ounce to $ 1150/ounce level in next few months .The long term prospects of gold market are also not very good .It is expected that gold prices in USA will cross below $ 1000/ounce level till end of the next year.