Gold Rises In All Currencies In 2016 – 9 percent In USD, 13 percent In EUR and 31.5 percent In GBP

Gold Price Performance

Source: GoldPrice.org - Click to enlarge

Gold was the best performing currency in 2016, rising as it did in all major currencies. It again performed the function as a hedge against currency devaluation and this was seen particularly in sterling terms with gold rising 31.5% in British pounds after the Brexit shock.

Gold Chart in USD

Gold in USD in 2016 Gold prices closed 2016 at USD 1,159.10, EUR 1,098.36 and GBP 942.58 per ounce. Gold prices closed 2015 at USD 1,062.25, EUR 974.32 and GBP 716.36 per ounce. (Gold AM fixes on December 30th 2016 and December 31st 2015 respectively) - Click to enlarge

UK investors and savers who had an allocation to gold protected their wealth from the Brexit debacle and the sharp falls in sterling seen in its aftermath. Gold rose over £220 per ounce and acted as a classic safe haven for investors exposed to the pound, and markets and assets denominated in British pounds.

Gold Chart in GBP

Gold in GBP in 2016 - Click to enlarge

The gains in euro terms  were more modest but robust. The gains seen are likely due to the continuing massive ECB money printing and debt monetisation programme and heightened risk of contagion in the Eurozone.

Brexit and the elections in France, Germany and Holland will support gold in euro terms in 2017 and there is the possibility of sharp gains in euro terms should the Eurozone debt crisis return.

Gold Chart in EUR

Gold in EUR in 2016 What drivers will gold respond to in 2017? Italian, Greek, Irish, Spanish and other banks and risk of bail-ins Dutch, German, French elections ... Eurozone contagion Continuing ultra loose monetary policies by Fed, BOE, BOJ and especially ECB Trump policies and tweets ... Geo-politics, cyber war & terrorism, conventional war & terrorism - Click to enlarge

President Trump has already shown himself as a man who likes to tweet and knows the power of the short sound bite and the medium that is Twitter. His skill in this regard was one of the factors which helped him become President.

However, this asset may become a liability for him and for markets when he becomes President. The art of diplomacy will become more important and 140 characters of unfiltered Trump is likely to create tensions with America’s largest trading partners such as China. This has been seen with China recently and his accusation that China “stole” the U.S. drone on Twitter.

It has already impacted markets as seen when he tweeted about Boeing and Boeing shares fell sharply.

Should he continue in this vein, it could lead to jitters in markets and a safe haven bid for gold in the event of ‘inflammatory’, tension creating and damaging tweets. His capacity to comment without fully understanding all the facts may be his ‘Achilles heal’ in this regard.

Overnight Trump’s tweet regarding Toyota saw the Japanese car maker lose $1.2 billion in value in five minutes.  Shares plummeted after the president-elect vowed in a tweet to stop the car manufacturer from moving abroad.

Stocks, bonds and property markets have performed very well in recent years. However, there gains are artificial and are based on near zero percent interest rate policies and from being bloated by monetary stimulus on a scale that the world has never seen before.

These bubble like conditions look increasingly vulnerable and will likely burst – the question is when rather than if.

Indeed, the turmoil that we have seen on international markets in 2016 appears a foretaste of a very volatile 2017. We continue to see conditions akin to those seen in 2007 and 2008. Many leading experts have echoed these concerns.

Geopolitical risk intensified in 2016 with Brexit, the Italian referendum and of course the election of Trump. The risk of terrorism and war remain ever present and gold will continue to act as an important hedge against geopolitical risk.

The risk of contagion in the EU – both political and financial and monetary now looms large. Today there is the added risk of bail-ins and deposit confiscation which will be see savings and capital confiscated from savers and companies in the next financial crisis.

Gold and Silver Bullion – News and Commentary

Gold Traders Most Bullish Since 2015 on New Year Concerns (Bloomberg.com)

Gold holds near 1-month highs ahead of U.S. jobs data (Reuters.com)

Gold at four-week high, palladium set for 9.2 pct weekly rise (Reuters.com)

Yuan Slides, Dollar Steadies as Europe Stocks Drop: Markets Wrap (Bloomberg.com)

2017 American Eagle Now Available at Bullion Exchanges (CoinWeek.com)

Gold vs Treasury Yield Percent

Source: US Funds - Click to enlarge

Gold Technically Oversold, Ready For Price Reversal (Forbes.com)

Own gold because Fed can’t figure out Trump (MarketWatch.com)

JPM’s gold buy hints at changes in world financial system (AveryBGoodMan.com)

China Can’t Quit the Dollar – Yet (Bloomberg.com)

Rally or Crash? Bitcoin Buyers Are Nervous About China (Bloomberg.com)