Gold never ceases to amaze market participants. Gold prices got off to a good start in the new year: the precious metal showed a steady growth amid uncertainties surrounding Donald Trump’s administration. The market response is quite predictable. The concerns which have arisen after the victory of the Republicans turned out to be the best way to support the prices of safe assets. However, the next event is supposed to have the opposite effect on gold prices. Usually gold weakens amid funds rate hikes, but not this time.
Against all odds, gold climbed 7 percent since the Fed raised rates in December last year. The markets faced a similar situation in December 2015 when gold jumped by 13 percent in two months after the rate increase. Now investors are on edge amid the next rate hike and impact of Donald Trump’s policy on the market. Meanwhile, according to the January statistics, investors bought more than 40 tons of gold during the first month of the new year. The relatively high demand boosted gold up to 1,234 dollars per ounce. Moreover, we should also take into account the seasonal gains: gold always goes up before the Lunar New Year when the Chinese citizens traditionally buy gold as gifts. “It almost looks as if there's a big fund manager getting into the market,” Bernard Dahdah, one of the London Bullion Market Association's most accurate forecasters, said. “We won't know who that is until next quarter.”
At least one such manager is known. Billionaire Stanley Druckenmiller said that he was buying gold in December and January due to the lack of clarity on the US government's policy.
