As 2017 begins there is heavy speculation that the desire for gold in the United States is going to increase. Reasons for this include domestic and international factors.
The Federal Reserve and Interest Rates
One big reason for the increase for physical demand of gold is the increased interest benchmark federal funds rates that are being increased by the Federal Reserve. Because of the increased rates, there is less opportunity to make a profit off of buying a CD or a Treasury Bond.
In fact, while growth for gold is not guaranteed it is increased by the very notion that it may increase; investors who are now seeing an opportunity for financial gain in physical gold over taking a risk of Federal Reserve rates are projected to chose the precious metal more and are driving the demand for gold higher.
Uncertainty Over the Trump Presidency
One of the main reasons here being the uncertainty of President Elect Donald Trump’s effect on the economy once he takes office on January 20th, 2016. There is concern with Trumps plans for reform on individual and corporate tax structure.
Trump’s plan will see just three tax brackets making domestic business and foreign investment more attractive and is projected to increase the GDP. However, this tax plan will also reduce federal revenue and increase federal debt and is feared that inflation will balloon. With the two projected outcomes between slight growth and increased inflation, many skeptics are predicting that value of gold will be increased by this.
The Indian Economy
A third factor is the growing economy in India. Right now, India is the number one ranked economy for 2017 GDP percentage interest growth. However, much of the citizens of India’s personal wealth is locked in physical gold (most of it in jewelry rather than gold bars).
This does not necessarily help the economy of India and in order to keep their economy growing, the government of India has set massive gold buying initiatives (India has also increased the import tax of gold). Now with gold buying programs and higher import taxes, the amount of gold imported to the worlds second largest gold importing country, India, is likely to fall.
In all, between the increase in interest rates by the Federal Reserve, the uncertainty of the economy under Donald Trump, and the supposed decrease in gold import to India, the desire for gold in the United States is looking to surely increase as 2017 progresses.
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