Gold demand to fall lower in 2017 thanks to strong dollar

Since President-elect Donald Trump cemented his place as the future head of United States of America, the dollar has been on a jolly ride ahead. Its race to the top has been documented pretty well through November and December 2016. Sadly, many other factors have been left damaged by the dollar surge.

Chief interest to us is the performance of precious metal gold, as a result of the dollar spike. As we all know the dollar and price of gold correlation makes it a very dicey affair. If the rate of dollar plunges, the currencies of other countries gain precedence and hence the demand for gold also increases. When the dollar leads the charge, the value of gold as an investment option and as commodity also reduces. And the beginning of 2017 is not looking too bright for gold in India.

Currently, the movement of the financial  market after Trump’s victory indicates that the people are confident of  their currency, and that earning in dollars will be  a profitable scene, hence the trust in the dollar is strong. People are expecting America to prosper and the optimism is reflected in their currency’s rise.

Also read: 2017: The year silver trumps gold?

India, however, cannot afford to blame Trump’s rise and the dollar drama for the falling gold prices. One can look in the direction of demonetisation to pinpoint the problems with gold. The rate of gold per 10 grams has been reduced by ₹3,170 since the announcement of demonetisation on November 8.

India is one of the biggest markets which places the most demand for physical gold. One of the reasons can be attributed to the black money market. In India, the most common method to convert black money into white money has been gold.  Now with demonetisation people don’t have the buying capacity and hence the reduced demand and this will be the state of affairs for some few months into 2017. 

Now gold is being considered as a bad investment in this phase and so gold markets from where India shops are also feeling the sting.

Also read:Demonetisation reduces Indian gold rush at Dubai Gold Souq

So basically our greed has effected a downward spiral for gold prices. Now it will be close to the middle half of the year to see some change in the fate of gold. Firstly because  the dollar is in no mood to come down, the European market is currently under the weather, the Italian banking system is undergoing severe problems and India will take time to recover from the demonetisation effect and people to have to come to trust the rupee once again. All this will only pan out by the middle of 2017.

• gold prices
• dollar vs gold
• strong dollar
• weak rupee
• demonetisation
• Trump election victory
• investment in gold
• gold as bad investment
• falling gold prices in India