2016 began well for gold traders.
In the first six months, gold bugs watched the metal soar from $1,070 to a high of $1,376.50.
Then, with a stronger dollar, rate hikes, and the election, the metal turned south shortly after. The other headwind has been India, which could limit gold exports and reduce overall global demand.
Gold would fall from $1,376.50 to $1,125 just months later as a result.
However, the fall looks to have ended… at least for the immediate-term.
Gold prices rocketed to $1,184.90 earlier this week as uncertainty surrounding the pace of interest rate hikes helped weaken the U.S. dollar, up 11% from a May 2016 low.
SPDR Gold Shares (GLD) rallied from a recent low of $107.49 to $112.67.
Randgold Resources (GOLD) jumped from $67.54 to $80.82.
That may be happening for a few reasons.
For one, traders may be factoring in the idea that the three rate hikes being priced into the U.S. dollar may be too aggressive. In fact, as most of the Fed wants to raise rates at least three times in the New Year, Atlanta Fed chief Dennis Lockhart forecasts only two.
We may not even see two in the New Year, though.
As it turns out, employment isn’t as strong as hoped.
The Federal Reserve’s labor market conditions index fell slightly in December, marking its first decline since March. And, the Labor Department reported that job growth slowed to 156,000 in December from 204,000 in November.
Two, its also quite possible weak holiday sales are playing a big role in gold’s move, too. Macy’s (M) and Kohl’s (KSS) for example just posted weaker than expected year over year slumps.
Since the U.S. economy is 70% consumer-driven, retail weakness is great news for the metal.
Three, gold is also moving higher on fears the market could soon capsize following the Donald Trump inauguration and the idea markets have moved too high, too fast.
In fact, there’s growing fear Trump may not follow through with his pledges to cut regulation, corporate taxes or boost infrastructure spending after all, boosting fear.
But it’s still too soon to argue he won’t. Markets have a tendency to overreact.
Four, there are fears that more countries could begin leaving the European Union, too, especially after Italians rejected a constitutional referendum, which saw the Prime Minister resign.
With more uncertainty than certainty, gold is looking like a safer bet these days. Look to the Stealth Stock Trader for even more ways to trade gold shortly.