(MENAFN- Khaleej Times) Throughout the year, geopolitical risks, uncertainties surrounding the US President Donald Trump's policies, fluctuation in the dollar's value and the US Fed's rate hikes have been driving gold's roller-coaster ride.
In the first 11 months of 2017, gold prices rose from $1,145 per ounce to $1,289, showing an increase of over 12 per cent. The trend for gold prices was quite volatile, at one point in September 2017 - gold rose to $1,346 showing an 18 per cent increase compared to the start of 2017.
"The overall performance of gold has been volatile during 2017 due to a chain of mixed events. During the first half of 2017, gold prices remained vulnerable due to two Fed rate hikes and positive sentiments in the US towards tax cuts and infrastructure spending," Badal Parande, analyst, Investment Research and Analytics at Aranca, said.
"The geopolitical tensions and poor sentiments towards US President Donald Trump's ability to perform well have pushed gold prices higher. The increasing physical gold demand trend in China due to fewer alternative investment options also supported the prices. Whereas the jewellery demand in India was dented as a result of regulatory moves such as GST and import duty, making gold prices fluctuate significantly," Parande noted.
"The low and the high point [of gold prices] were both driven by the outlook for the US economy and the uncertainty created after Donald Trump moved into the White House. Early weaknesses were driven by the belief that President Trump would deliver tax cuts and infrastructure spending thereby raising the government deficit and with that, a faster pace of rate hikes," Ole Hansen, head of Commodity Strategy at Saxo Bank, said.
As the months wore on and Trump increasingly began to struggle to get anything passed through Congress, the attention instead turned to heightened geopolitical risks, not least the August and September stand-off between US and North Korea. This uncertainty attracted safe haven and diversification demand.
"On top of these movements driven by politics, the dollar has weakened by close to eight per cent year to date, thereby providing an additional layer of support for gold, given the inverse correlation between gold and the dollar," Hansen added.
Global gold demand remained quite muted this year with the World Gold Council recently reporting that global gold demand in the third quarter was the weakest since Q3 of 2009. The reduction was primarily driven by tax and regulatory changes in India, which weighed on domestic gold demand.
Hansen said that gold remains stuck in its four-year range as 2017 nears to a close.
"Gold is currently trading 12 per cent higher with most of the gains seen during the first quarter of 2017. On a longer scale, gold is trading just four per cent above $1,230 per ounce, which has been the average price for the past four years," he said.
"Gold, in other words, needs a clear spark to jolt out of its current range of $1,200-$1,350 per ounce," he added.
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