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Three factors that could send the price of gold higher in 2015

by , 18 December 2014

No-one can predict what's going to happen on the financial markets. And this couldn't be truer for gold.

For much of the time, there doesn't appear to be any logic or reason behind its price movements.

In fact, at times it seems the gold price reacts in the opposite way of what investors expect.

So what lies in store for the yellow metal in 2015? Is it finally going to make a recovery?

Let's take a closer look…

The irrational behaviour of the gold price

At the beginning of the month, the Swiss held a referendum over whether the country should substantially increase its gold reserves.

Before the vote, gold bugs anticipated a rise in the gold price should the Swiss vote yes as the Swiss central bank would be a major gold buyer.

But the Swiss voted no. Yet, in spite of this, the gold price went on to rally the very next day.

This reaction, along with other factors over the past few years, just shows how the price of gold can be very hard to predict.

When it comes to looking at the gold price, you need to look at its overall trend over the long run. It’s useless watching the price on a daily basis and trying to make sense of it.

Have a look at the chart below of the gold price over the past three years…

Gold price over past three years

Three reasons why gold could recover and rise in 2015

Looking back at the behaviour of the gold price over the years, and you can make some sense of its price movements. That’s the benefit of hindsight.

For example, the rise of gold to $1,900 an ounce was a move too far. A correction was inevitable.

There are three reasons that could see the gold price bottom and start to recover in the New Year, Bengt Saelensminde in The Right Side explains…

Reason #1:
Even though the US has stopped the printing presses for now, other nations look likely to keep stimulus programmes on the go in a bid to keep their economies chugging along.

Reason #2:
The economic war on Russia is sending the country towards gold as its currency depreciates. Since the rouble’s plunge earlier this week, Russia’s been selling foreign currency reserves.

Reason #3:
With low interest rates the norm since the financial crisis, this makes gold look more appealing. If you can’t make money in cash, there’s more reason to hold gold in the hope of a price rise instead. Plus it’s an insurance against another financial crash.

No-one knows what’s in store for gold, but if you understand the fundamentals at work, you stand a better chance of benefitting over the long run.

So there you have it, three factors that could send the price of gold higher in 2015.

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Three factors that could send the price of gold higher in 2015
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