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Is 2015 Going To End As The Year For Gold

Gold is one of the most sought after commodities in the world. However, as economic conditions got better and better after the 2008 and 2009 financial crisis, growth in the value of the currency started moving in the negative direction. Today, the value of gold is hovering around $1,200 per ounce, and has been for quite some time now. As a result, investors are starting to ask when they will see the next big gain for the value of gold. Personally, I think it’s going to happen by the end of the year 2015. Here’s how I see things happening.

Dollar Continues To Take A Toll On Earnings

The US dollar is still incredibly strong. As a result growth in foreign trade is still not doing as well as it should be. With the value of the dollar up, costs of American goods in other countries are up; leading to the problem. While consumer spending accounts for about 70% of the US GDP at the moment, foreign trade is incredibly important. So, this is something that we’re going to want to watch very closely throughout the rest of the year.

Federal Reserve Is Likely To Raise Interest Rates

On top of the struggling exports, another major hit to financial markets is likely just around the corner. In September, experts are expecting the Federal Reserve to raise its interest rates. When interest rates go up, consumers and businesses spend more money on interest, which tends to have a slowing effect on economic growth and a detrimental effect on the stock market. As a matter of fact, historically, the stock market sees declines for about 6 months after interest rate hikes.

Now Let’s Talk About Gold

First off, let’s think about how gold is unique from other commodities. Supply and demand from consumers aren’t the only movers in its value. Gold is a safe haven investment. Therefore, its movement is negatively correlated with the health of the economy and the health of financial markets. When investors worry about the economy, they tend to take money out of the market and buy gold in an attempt to hold its value. As a result, demand for gold rises, supply falls, and the value of gold climbs under poor economic or market conditions.

Wrapping It All Up

Keeping those three factors in mind, it’s clear to see that the end of the year 2015 is likely to be a great time for gold. With the US dollar’s value so high, exports are still struggling; not to mention, there are other major signals of economic hardship in the future. Also, with the Federal Reserve interest rate hike just around the corner, investors are likely to already be looking at gold; waiting on the word. So, when we tie this all together, we see that the US economy and financial markets are likely to have a tough time throughout the last quarter of 2015; while the value of gold is likely to skyrocket.

What Do You Think?

What do you think we’re likely to see from the US economy in the second half of 2015 and what affect do you think it may have on gold? Let us know in the comments below!

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