Gold is starting to regain its luster in the new year, reversing a long string of losses following the U.S. presidential election.
The precious metal came under pressure after the election of Donald Trump prompted a rally in the dollar, U.S. stocks, and riskier financial assets. The decision by the Federal Reserve to raise interest rates in December further weighed on gold prices, and central-bank officials indicated they may raise rates another three times in 2017.
However, analysts say gold looks ready to stage a comeback as political and economic risks gain renewed attention with the presidential transition. Gold prices rose to a two-month high on Tuesday, trading at their highest level since Nov. 17. On Friday, futures for February delivery closed at $1,204.90 an ounce, up 0.7% for the week in its fourth consecutive week of gains. “The world marketplace is getting a bit anxious,” said Jim Wyckoff, senior analyst at Kitco Metals, in a Wednesday note.
Comments from Trump helped support gold Tuesday, after he told The Wall Street Journal that the dollar is “too strong,” sending the currency lower. A strong dollar has hurt gold prices in the past couple months, since gold is priced in dollars and becomes more expensive to foreigners as the U.S. currency rises.
THE ANNUAL WORLD ECONOMIC FORUM in Davos, Switzerland, also highlighted challenges in globalization and trade, according to James Steel, head precious-metals analyst at HSBC in New York. Expectations for slowing global trade may help push gold higher, he says.
The investor enthusiasm that pushed stocks up on hopes for economic growth and stimulus has tempered in the new year, and some see that as a bullish sign for gold. The metal is often viewed as a haven asset by investors and is in high demand in times of uncertainty and risk-off sentiment.
The rally that took the Dow Jones Industrial Average within points of 20,000 in the past month has stalled. The Standard & Poor’s 500 index has been moving sideways in recent weeks and has traded 67 days without closing more than 1% lower, according to Bespoke Investment Group.