The spot price of gold reached above the $1,340 mark on January 15. Gold has now risen over $100 since December 12, buoyed by physical demand in Asia and continued weakness in the U.S. dollar. The dollar weakened in spite of a December rate hike from the Federal Reserve. U.S. tax reform was also expected to put downward pressure on the safe haven, but gold has soared since the legislation was signed in by President Trump.
One significant factor has been the petering out of the price of bitcoin since mid-December. The most popular cryptocurrency reached $20,000 the weekend of December 15, but has since plunged to $14,000 month over month. Interest in cryptocurrencies as a speculative asset has eaten into interest for gold, but bitcoin’s loss has apparently been gold’s gain in recent weeks.
Investors should keep an eye on the iShares S&P/TSX Global Gold Index ETF (TSX:XGD). The ETF was trading up 2.1% at the top of the noon hour on January 15. Some of its top holdings include Canadian producers like Newmont Mining Corp., Barrick Gold Corp., and Goldcorp Inc.
The U.S. dollar index hit its worst mark since January 2015. According to some analysts, purchases by jewellers to meet wedding season demand has had a positive impact on prices. Gold still has a tough road ahead in 2018 as global growth is expected to reach above 3%.
Gold has threatened the $1,400 mark in the past three years only to succumb to downward pressure. This volatility will likely continue in 2018.