With the recent interest rate rise by the U.S. Federal Reserve, it stands to reason that there can only be one victor between the U.S. dollar and the price of gold. The two are both heavily related to each other since gold is denominated in dollars. After all, any increase in the purchase of the currency due to the newly-stated rate rise will undoubtedly lead to lower gold prices. And gold is a commodity that is already battling against a 5-year low around $1,070 per ounce.
What’s worse is that this may just be the beginning. The next planned planned rate increases next year could mean that investors and opportunists. These are the people who had originally ploughed their finances into Commodities for stability, may now consider them a non-interest paying asset and look to sell them off in favor of generic saving opportunities if rates increase as planned.
Traders and Spread Betting enthusiasts alike have been waiting since mid-October for the price of gold to bottom out since its’ heavy fall from around $1900 in 2011, but it seems that many will have paid hefty prices losing out to a precarious market as prices continue to tumble and show no sign of abating their falls over the Christmas period. On the announcement of the interest hike by the Fed on the 16th December, the price in Gold fell as far as the $1050 mark and seems to be edging ever-closer to the 2009 low of $987. Perhaps the most worrying factor is that gold had tended to perform well when other commodities and the dollar were failing to perform, but with the dollar on the rise and speculation that Oil will likely balance out and recover in 2016, is gold likely to be as attractive an investment as it has always been to a changing market?
With all this in mind, would it be fitting to say that now is the time for private investors and ETF holders to start thinking about dumping their gold portfolios? Perhaps it is too soon to know with the rate rise having only just occurred and with the implications of it not yet fully realized. Should the US decide that their planned subsequent rate rises are premature, further delays could help the price of gold bounce back as a more confident investment for the short-term, but inevitably this is unlikely to for any real length of time. In our opinions, while gold may not be the safe haven that it once was, it is still safe for now and investors should maybe look to divide their portfolios among several commodities or shares that are likely to retain their values past the near future. For those of you however, who are looking to make a quick buck and enjoy playing against volatile trading markets, it seems an obvious bet to say that gold is likely to fall, but some intra-day trading on the small peaks and troughs may make it worthwhile as the market struggles to see how the future of gold will shape itself into the New Year.