Gold price steady with strong reasons to invest in 2017, but Ugandan refinery running into trouble
The gold price has remained steady currently free of a major influencer to continue the recent rise or enforce a downwards adjustment. “There is a good battle going on between the bulls and the bears to seize control of the gold prices and so far, there has not been much progress from either side and this is the reason for the stalemate and the consolidation in the prices.” Wrote Colin First in FXEmpire.
Equities.com detailed reasons to dedicate a larger proportion of your portfolio in gold, citing that, despite a post US election decline, the fundamentals of the gold price look healthy for 2017. The key points were:
- Political uncertainty usually bodes well for gold, but Trump’s rhetoric around pro-growth policies boosted confidence in the U.S. macro indicators, having a bearish effect on the gold price. However, the fuddling and delayed announcement of hard economic policies is causing an investment rethink and recalibration towards more reliable assets.
- The US Dollar had its worst January in 30 years. There’s a notable inverse relationship between the gold price and dollars, in addition to a weaker dollars being more lucrative for foreign buyers.
- Europe is in trouble again. Economic uncertainty from political forces looks high, with political rejection of the status quo gaining ground in The Netherlands, France and Germany, in addition to a structurally unsound Italian banking system and Greece’s chronic fiscal crisis.
- Since records began 20 years ago, the correlation between real interest rates and the gold price has never been tighter. However, despite an increasingly strong likelihood of nominal rate hikes this year, there is an even greater likelihood of inflation, with the CPI and inflation expectations both over 2%, the highest in three years, which would mean lower real rates. Combined with a drag on growth from monetary tightening, this could well lead to a stagflationary environment which would bode well for the gold price, as alluded to by Alan Greenspan
- Gold has moved above its 100-day moving average. The last times it did this the gold price advanced 18% and 13% and acted as a floor and ceiling during the ebbs and flows of 2016.
However, mining, which may well see an investment pickup this year, was in the news for other reasons. Transparency International’s Peter Wandera told Agence France-Presse (AFP) that there were fears a Ugandan gold refinery could be propping up rebel forces in the region.
The newly-inaugurated African Gold Refinery in Entebbe (AGR) sources some of its gold from South Sudan and the Democratic Republic of Congo (DRC), where a plethora of warring factions operate and mine gold to fund their activities.
“Uganda has continuously failed to implement the necessary components to reduce the trade in conflict minerals from the DRC,” said Wandera.
However, AGR’s owner Alain Goetz replied to AFP saying that they don’t allow “the bad boys” into their supply chain through strict compliance measures and due diligence, noting that only 0.1% of gold in the DRC is owned by rebel forces.
Last year, Global Witness, a London-based Watchdog, reported that gold “preyed upon by armed groups, bandits and corrupt elites and the revenues generated by eastern Congo’s artisanal gold sector have all too often funded corruption or fuelled abuses and violent conflict rather than helping to relieve the region’s poverty.”
Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-steady-with-strong-reasons-to-invest-in-2017-but-ugandan-refinery-running-into-trouble-12990/