True, it was only a modest bounce, and on a light trading day, at that. But two things make the bump a significant one.
Longest Weekly Losing Streak in a Dozen Years
It’s been 12 years since gold prices declined seven weeks in a row. So just halting that losing streak was a big deal.
The Dollar Bounced, Too.
Gold doesn’t always track the dollar, but it does so consistently enough that a deviation from this norm is notable, particularly when gold prices seem to be plummeting with no end in sight on the smallest excuse. When the dollar goes high, gold almost always falls lower. But not this time. Even more remarkable is that the ICE Dollar Index actually closed on Tuesday at its highest level since 2002.
According to the year-end commentary of Gary Wagner, from The Gold Forecast, this was actually a significantly positive year for gold prices.
“2016 was truly a pivotal year for gold prices. It contained a key reversal, with a change of price direction and market sentiment.
Prior to this year, gold prices had been in a multiyear decline. In August 2011, gold traded to a new historical and record high price of $1,920 per ounce. From that point forward, year in and year out, gold prices declined. And yet from January of this year to July, gold traded as high as $1,375, which turned out to be the yearly high.”
Due to significant increases early in the year, gold is actually looking like it will end the year up by about 6% . That is the biggest annual gain since 2012. So, looking at the big picture, gold may actually have bounced off a bottom this year. And that isn’t a completely implausible outlook.
If gold prices cease their unusual behavior of ignoring global economic and political stability and once again become the “safe haven” investment it has been considered in the past, there are certainly more than enough circumstances to make it attractive to investors, both currently and in the near future.