What factors will affect gold in 2015?

The price of gold often depends on a number of competing factors, some of which can be very difficult to predict in today’s socio-economic climate.

However, analysts across a range of disciplines have made predictions of what they believe will be the most important influences on gold markets in 2015.

Here is a roundup of some of their comments and forecasts for the coming year. Do you agree with their outlook on gold?

1. The US dollar

The price of gold typically has an inverse relationship with the strength of the dollar. In other words, gold tends to fall as the dollar rises.

However, both the dollar and gold have already shown positive performances this year. The precious metal saw its strongest rally since 2012 in March, with prices eventually surpassing US$1,200 per ounce. This could influence more people to buy gold in anticipation of future rises.

Nevertheless, Delphine Strauss of the UK’s Financial Times said the dollar looks set to remain strong following the European Central Bank and the Bank of Japan both announcing new rounds of economic stimulus.

2. Interest rates

As gold does not pay interest, the current low-interest environment worldwide has been positive for the precious metal in recent years. Should near-zero rates begin to rise, however, investors may feel the need to move towards assets that have a higher yield.

Gold investors will be eyeing the US market in particular, following the Federal Reserve’s decision to stop quantitative easing measures in the country last year. Typically, this is a sign of strength but the US economy has stuttered in the 6 months since the bond-buying program was halted in October.

On Friday (March 29), Fed Chair Janet Yellen indicated an interest rate change “may well be warranted later this year”. While this had a short-term impact on gold prices, effects over the longer term are harder to predict.

3. Global economic stability

Gold is a safe haven investment, which means it performs well when there are concerns over the economic or political stability of countries and governments.

Greece’s ongoing economic issues have created discord in the Eurozone, particularly with the region’s largest economy, Germany. There are also still ongoing tensions in Ukraine and the Middle East.

Further to the east, China and India will also be under scrutiny from gold investors, as the nations are currently the world’s largest consumers of the commodity. China’s economy has slowed over the last year, while India still has some import sanctions in place preventing the inward flow of gold.

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