Gold Monthly Fundamental Forecast January 2016

Outlook and Recommendation

Gold ended 2016 at the bottom of its trading range and will enter the new year at 1060.40 down close to 11% for the year.  The Federal Reserve hiked interest rates for the first time in nearly a decade on December 16, signaling faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis. The greenback’s rise amid expectations of higher borrowing costs in the US, which culminated in the Federal Reserve raising interest rates this month, have contributed to gold losing its allure as a store of value.

The US central bank’s policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.

The central bank made clear the rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.

Fed policymakers’ median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point hikes next year. Based on short-term interest rate futures markets, traders expect the next rate hike in April.

Gold has lost value for three straight years, starting in 2013. That is the longest streak of annual losses for the metal since 1996. A rise in the dollar which has gained 9.1% in 2015, also weighed on dollar-denominated metals, making them less appealing to buyers using other monetary units.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events Scheduled In January