Commodities Precious Metals

Gold price loses its shine as US dollar retains strength

The gold price headed lower Thursday as the dollar extended gains on US President Trump’s GOP tax reforms and interest rate hike expectations. But, while the price of gold is on the slide, World Gold Council chairman Randall Oliphant, said it could rise in the next 12 months.

The dollar is gaining ground, with a number of key details keeping investors keen on the currency. However, when the dollar rises, the price of gold falls. That’s because the precious metal is valued in dollars and becomes more expensive for purchases made in other countries, so the price moves lower.

In addition, Federal Reserve Chairman Janet Yellen’s comment earlier this week that inflation problems might not be as big as previously stated, also weighed on the price of gold.

Speaking to Bloomberg reporters at the Denver Gold Forum in Colorado, Oliphant said production of gold in 2017 could well be the highest ever. Going forward, gold production would likely begin to slow, he added.

Meanwhile, and despite the current falling trend in gold prices, demand for the safe haven investment could rise. Key drivers of that view include continued political uncertainty in the US persists, amid domestic policy issues. Meanwhile, North Korean tensions remain on investors’ radar.

Gold is a popular safe haven investment, as it’s a tangible asset that investors own and can physically sell to secure funds. It’s also a sensible diversifier for an investment portfolio, as it responds differently to key events than stocks and bonds.

In addition to that, consumer demand for gold in China and India, is performing well., That could lead to a separate, albeit parallel increase, in demand for the yellow metal.

Indeed, Oliphant told Blomberg the gold price could rise as high as $1,400 an ounce, 12-months from now. However, that would still be some way below the record high price of $1,900 an ounce it hit in 2011.

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