Gold is steadily gaining in value – disobeying an important market rule. The experts of one of the Swiss big banks will rejoice.
Ardent supporters of gold investments are keen observers of the Federal Reserve's (Fed) bank policy. They know all too well that the dollar tends to gain in value with every increase of the key U.S. interest rate – making gold in turn less valuable as the precious metal is calculated in the U.S. currency.
This golden investment rule however suddenly seems to have been broken, «Bloomberg» reported. The Fed in December increased rates – the price of an ounce of gold however appreciated 7 percent to $1,236 since.
Peculiar Change of Behavior
The precious metal did a similar trick in the aftermath of the increase of December 2015, adding more than 10 percent in the two months following the decision. The potential of further increases seems not to have scared off investors in gold – and the Fed intends to raise rates three times this year.
The change in behavior seems peculiar, yet expert have been quick to come up with an answer. They say that the rise is due to a safe-haven effect – because what investors fear more than a strong dollar is four years of Trump-induced volatility.
Uncertainties Are Taking Hold
And Europe seems to offer little hope for more stability in 2017: Germany and the Netherlands are electing new parliaments. And the presidential elections in France may yet produce the first far-right head of state in the heart of the European Union, with the worrying prospect of France ditching the euro.
Uncertain times thus; and the analysts at UBS will still feel vindicated. The projections for the gold price in their most recent analysis proved spot-on – and the bank expects the precious metal to continue gaining in value given the maverick policy statements by the U.S. president.
