The US dollar’s strengthening, the expected interest
rates hike and the lower risk and volatility in stock markets are most
important factors that are driving gold prices down. The exposed Trump’s
program for boosting the GDP definitely will lead to rising interest rates and
stronger US dollar, which is attracting for investors. Hence this is bullish
for the dollar, gold is going to suffer.
But in case we are having long term interest rates
increase, this does not always mean that we will have falling prices in gold.
According to the World Gold Council the average gold returns were positive as
long as interest rates increased gradually and didn’t reach extremely high
levels - over 4%. Some economists have shared the opinion that during Trump’s
presidency a recession will be a fact, because the current expansion on stock
markets is taking too long time. In this common, the investors in gold mining
companies should consider this and take steps for profit taking, but instead of
this the observation is that they keep their investments for a longer
term.
And while we are witnessing the brutal post election
sell-off, shall we abandon all things gold?
In fact the post elections fever dumped the gold
hedges and the gold suffered huge drop for the last 3 weeks. Obsessed by
the fear of the unexpected, traders generated enormous sell offs and couldn’t
think deeper over the market situation. If looking inside the gold stocks’ fundamentals there
might be found an amazing way to fight the prevailing fear.
The gold miners just released their third-quarter
results, which proved very impressive. I suggest you to look at the below GDX Component
Comapnies’ Fundamentals Q3’2016 table. Lower costs and higher gold
prices usually lead to surging operating cash flows and profits and the gold
miners’ fundamentals are stronger now. So golden bulls are still among the
market.
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