World Gold Council fears for gold’s appeal amid strength of the dollar

Gold bars are stacked on April 6, 2009 at a plant of gold refiner and producer Argor-Heraeus in Mendrisio, in the southern Swiss canton of Ticino. While the world grapples with the biggest economic crisis since the Great Depression of the 1930s, demand for the firm's watch and jewellery components business has slumped as Swiss and Italian watchmakers trim production. Meanwhile, investors are hoarding gold bars -- an age-old insurance in times of war or calamities -- sending demand for the group's bullion production soaring. To cope with the new balance of demand, Argor is shifting manpower from its semi-finished products division to gold production and is running day and night. With orders for gold bars piling up, delivery times now stretch to two months instead of 10 days.               AFP PHOTO / Sebastian Derungs (Photo credit should read SEBASTIAN DERUNGS/AFP/Getty Images)

The World Gold Council has expressed concern that the strength of the dollar could limit the global appeal of gold this year.

In a recent report, it noted that in addition to currency issues, heightened political and geopolitical risks could impact on gold prices and consequently jewellers.

It noted that key elections in the Netherlands, France and Germany would increase political risk.

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While the UK economy is still expanding, it said, the pound fell sharply following the referendum decision and continues to weaken every time the markets sense that there is an increased chance of a ‘hard’ Brexit.

In the US, there are positive expectations about some of the economic proposals of president-elect Donald Trump and his team, but there are also concerns, the council said, adding: “the US dollar has gained ground since Trump swept to victory last November, but uncertainty is rife.”

Jim O’Sullivan, chief US economist at High Frequency Economics, sees “a meaningful risk that negotiations on trade will turn belligerent” and suggests that “confidence in markets  could be affected by geopolitical tensions triggered by the new administration”.



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