1st Quarter: US Dollar Decline to Boost Gold?

2016 saw plenty of market swings and brisk headwinds for precious metals, including rising interest rates and stock market optimism about the U.S. election. All the same, gold notched a solid 9% gain in 2016.

Safe-haven assets are in steady demand in a world with global geopolitical uncertainty, huge unknowns in President-elect Donald Trump’s new policy direction and low interest rates around the globe.

The U.S. stock market has just hit some impressive records, but cooler heads could soon prevail. Many investors are starting to feel like the equity market heat is running out of fuel in the new year.

If you agree, the timing in the first quarter of 2017 could be in your favor.

According to gold analysts, the first quarter of any year is traditionally the strongest for gold. In the last 11 years, all but one first quarter have delivered positive performance for gold prices!

Of course, there is no guarantee of any result in the market, despite what may have happened year after year. But this factoid is worth considering as you consider your market strategy in 2017.

Here’s what else you should consider:


What could send gold higher quickly in the next three months? A sharp drop in the U.S. dollar.

The greenback is hovering at a fourteen year high, but analysts now believe it has gotten way ahead of itself.

Colin Cieszynski, chief market strategist at CMC Markets, is talking tough on the dollar at its current over-inflated levels: “A higher dollar and hawkish Fed coming at a time when other economies around the world are struggling could undermine the economy and the dollar going forward.”

Cieszynski doesn’t mince words: “Not only have U.S. dollar traders put the cart before the horse, it’s in the next county already!”

He isn’t alone in this forecast. Here’s some key factors that could send the U.S. dollar lower fast:

The Rose-Colored Glasses Come Off…
Right now, the biggest risk to the U.S. dollar is exaggerated expectations about continued Fed tightening in the months ahead, Cieszynski says. He thinks this optimism is short-sighted since the actions of the Fed are far from guaranteed.

Rising Oil Prices…
Henry To, chief investment officer at CB Capital Partners, says rising oil prices could also put negative pressure on the dollar. “Historically, higher oil prices have driven declines in the U.S. dollar index, and vice-versa. Movements in oil prices have preceded and caused subsequent changes in the U.S. dollar index,” To believes. He also thinkgs higher oil prices are coming soon.

Tax Cut Benefits Not Coming Soon…
President-elect Trump has promised an impressive roster of tax reforms which could send millions into the hands of small business and individuals. However, any promised corporate and personal income tax cuts by the Republicans wouldn’t be effective until the year 2018!

This could be a cold bucket of water to the business community, at least in the short term. “If the U.S. economy slows down in 2017, the Fed will need to tone down its hawkishness, which in turn will also put pressure on the U.S. dollar index,” To says.

Clearly, the dollar has little room left to run when it is already at a 14-year high.

Analysts at iiTrader agree: “Gold benefited from U.S. dollar weakness in late 2016 and we are looking for this trend to continue in 2017… the price action seems to be priming for a strong start to the New Year.”


Recent consensus forecasts put the median average price for gold at around $1,300/oz in 2017, which would represent more than a 10% gain for gold!

Regardless of your personal forecast for the dollar, the direction of interest rates and the potential success of our new President, you will agree that diversification is the best strategy for these uncertain times.

Many of our clients have done exceedingly well in various investments over the last year and are looking to reinvest those gains into precious metals. Are you in a similar situation?

Our gold experts are ready to help you consider all your options to balance out your risk by diversifying your IRA with gold and silver.

Take the bull by the horns in 2017 and add some safe-haven assets to your portfolio. There is nothing like it for a better night’s sleep.

Get Your Free 2024 Guide
Most Recent News