What is the Future of the Gold Price?

At the start of the year, commodities were deeply unpopular and unloved, but have seen a dramatic rise in value since January

Dan Kemp 11 October, 2016 | 10:40AM

When 2016 is history and we reflect on the year that was, the gyrations in the price of commodities, and the companies that produce them, will undoubtedly be one of the key areas of focus. At the start of the year, commodities were deeply unpopular and unloved yet have been dramatically rehabilitated in the view of market participants.

This is evidenced by the sharp recovery in spot prices, related share prices, positive fund flow data and a significant drop in those speculating on further falls. Despite this sharp change in sentiment, commodity investment remains largely unpredictable in the short-term and volatility numbers remain abnormally high on most measures. Amidst the ongoing struggle to identify an equilibrium price post-recovery, it is difficult to see a reversal in this volatility anytime soon.

The most notable example of both the recovery in sentiment and ongoing volatility is the price of gold, which has increased 23.43% for the year. Despite the strong rise, it is the share price movements in gold mining companies that have witnessed enormous divergence. Across the past year, the three biggest gold miners – Barrick (ABX), Newcrest (NCM) and Goldcorp (G) – have increased 159%, 71% and 17%.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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