The relationship between gold and currency has been very tight historically, and the gold price per gram is certainly something any investor should be keeping an eye on. The gold price is going through an arguably odd period lately, rising with over 7% since December 2017.
The phenomena in considered to be helped by the weakening of the US dollar that went down by over 1.2% in February 2018. That represents one of the most important declines since July 2017. Regarding the expected forecasted evolution of the gold price in 2018, that would be an increase in US bond yields that are inflation adjusted. That is expected to weigh on the evolution of the gold price through 2018. Analysts of The Commonwealth Bank are observing how gold prices are having a tendency towards a gradual decline. The expected price for gold by December 2018 in $1,265 an ounce, although the weaker US dollar remains a highly significant risk that must be taken into consideration.
However, The Reserve Bank of Australia has been implementing divergent monetary policies that help the evolution in a positive direction. The prospect of strengthening currency has been, in the last years, weighing on gold prices per gram and that made bullion producers quite unhappy, but Australia managed to find a way of going into a different direction. A per 2016, the price per ounce has been somewhere around $1,700, being virtually unaffected by the global financial crisis. The year 2016 represents an important checkpoint in analyzing the gold price
In 2016, Raleigh Finlayson, the managing director at Saracen Mineral Holdings, identified the two key points that make Australia look like a great place to invest in gold. Firstly, he takes into observation the very good margins in Australia. Of course, he then recognized the implication of Federal Funds rates, followed by possible strong currency could lead the Australian dollar towards sliding to the 60 U.S. cent level. All in all, Finlayson was then expecting Australian gold prices to remain stable. He identifies the lower fuel and labor costs in Australia as key elements that influence the very good margins in Australia.
Having that in mind, we can understand the Australian Government’s planned policies regarding gold prices for 2018. Australia is planning on making a profit on Gold Exchange Trading Funds (ETFs). The New York Stock Exchange is planning to list the Perth Mint Gold, an ETF Trust. A filing coming from the U.S. government, Gold Corp., is expected to be taking care of the storage of the gold owned by the fund and help with the transfers. Exchange Traded Concepts, based in Oklahoma, will take care of administrative issues.
The main goal of this is to help investors make investments in gold by using shares, through the ETFs, and give them the possibility to then exchange that into gold. The decline of the US dollar in 2017 and the tensions around the uncertainty
surrounding US government’s policies under the presidency of Donald Trump have
had a clear impact upon the demand on bullion, according to Bloomberg
In conclusion, we underline the importance of watching governmental policies and the international relation when focusing of understanding the following evolution
of the gold price, in globally, as well as in Australia in particular. New
policies and the strength of the US dollar in the upcoming months will clearly continue to impact margins and should be watched by investors that are planning to invest in gold.