Can Gold Regain It’s Shine in 2016?

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It’s no secret that gold prices have fallen since 2011. Investors have long poured a portion of their money into gold. The precious metal has always been a smart investment choice, and it’s still a decent choice in 2015, depending on when you invested.

Before we talk about whether gold can regain its value, it’s important to take a look at the historical gold prices over the last 10 years to really see where gold is in terms of value.

In 2006, the price of gold in January was $513. This is a relatively low price in terms of what gold is valued at today. The current value of gold as of December 22 is $1,076.30. Anyone that invested in 2006 would still have doubled their money even with today’s lower prices of gold. It’s a fairly substantial investment, and one that holds its value very well.

Gold Prices Soar in 2011

When the global economy reached crisis levels, the value of gold increased. Taking a look at January 2008, gold is priced at $912.50. A year later in 2009, gold is priced at $869.75 which is actually a loss for the precious metal. By January 2010 gold reached $1,087.50 per troy ounce. Gold ultimately topped off in August 2011 when gold prices reached $1,821 an ounce.

The price of gold quickly fell down to less than $1,200 by 2013, and it fell to the low levels witnessed today when investors started expecting the Federal Reserve to raise interest rates, which they eventually did.

It is safe to say that gold would not reach its 2011 levels unless a dramatic drop in the world’s economies occurred. If China’s markets continue to struggle, causing the United States and European markets to tumble, we can expect gold prices to increase in 2016. However, the likelihood of this occurring is rather slim given the current economic data released by the United States, Europe and the world’s biggest economies.

With that said, China still has a long way to go to correct their current economic struggles, which may persist until the latter half of 2016.

The Greenback is Rising

If this question was asked in April, there’s a chance that analysts would predict that gold prices would increase. Gold prices normally go up with inflation levels, but in 2012, we saw that there was not the rampant inflation witnessed in the past. Oil prices have practically collapsed, and inflation has been deferred as a result.

What we do know is that when the USD’s value rises, gold prices seem to fall.

The greenback has been performing quite well, and is currently at 98.04 on the US dollar index (DXY). Recent high levels were hit in November, with a 52-week high of 100.51. The greenback is performing rather strongly, and analysts expect this to continue.

If the greenback continues to maintain its value, gold will not see its value increase in 2016.

Goldman Sachs (GS) also announced their report that stated they expect gold prices to fall below the $1,000 mark in 2016. Analysts expect gold prices to rebound between 2016 and 2020, but there are too many variables between this timespan to invest in gold with the utmost confidence. It’s unlikely that gold will regain it’s shine in 2016 given current market conditions.

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