In 2016, gold experienced extremely volatile fluctuations. Last year, the London Metal Exchange’s gold price closed at $1,159.10 per ounce, with an annual gain of just 9%, a relatively modest increase. This figure is somewhat one-sided and fails to capture gold’s remarkable surge to $1,370 per ounce on July 6, 2016, nor does it reflect the 30% rise it posted in the first half of the year. In the fourth quarter of 2016, not long after, gold plunged to a low point, briefly dipping below $1,150 per ounce.

　　At the beginning of 2016, the market experienced a strong and unexpected recovery in gold prices. Gold trading was robust in the first quarter, and in the second quarter, prices remained steadily around $1,200 per ounce. Then, on July 23—the day of the Brexit referendum—gold prices surged into the third quarter, reaching between $1,300 and $1,350 per ounce. The year’s peak price was recorded in the third quarter.

　　Generally speaking, last year the gold market was significantly influenced by monetary fundamentals: years of quantitative easing in developed economies, coupled with a sustained commitment since the 2008 financial crisis to reduce the likelihood of large-scale fluctuations. Nominal interest rates have hovered near zero, while real interest rates have become even more negative. Brexit has added to global economic uncertainty, driving the safe-haven asset gold to its highest-ever level.

　　However, as we entered the fourth quarter, the U.S. presidential election took center stage in global markets. Interest-rate hikes appeared imminent, sending the U.S. dollar soaring while gold was sold off.

　　Many analysts had predicted that if Trump were elected, gold prices would rise by at least $100 to $300 per ounce. However, the rally in gold proved to be remarkably short-lived. Ultimately, the gains failed to sustain. Largely influenced by Trump’s ambitious infrastructure plans and business-friendly policies, his election sent shockwaves through the market, driving gold prices down by $175 per ounce to a low of $1,125.70 per ounce by noon on December 20.

　　In fact, Trump’s influence extends beyond just gold prices. Investors, affected by his actions, have been rushing to sell off their gold reserves. GLD, a large gold ETF, saw gold redemptions totaling 135 tons between November 9 and January 3 of the following year. Consequently, in the second half of the fourth quarter of 2016, the market entered a minor bear-market cycle, heavily influenced by the Trump phenomenon.

　　At the beginning of 2017, the underlying economic conditions remained unchanged: years of loose quantitative policies in the U.S., the U.K., and Japan had led to intense global monetary liquidity pressures. In theory, gold should have performed strongly in such an environment. However, its performance has been hampered by market expectations regarding real interest rates—factors closely tied to monetary policy and economic sentiment indices. Nevertheless, given the unpredictable impact of future geopolitical developments on the economy, current forecasts for gold’s outlook can only be described as “volatile.” Global long-term fundamentals and structural issues persist, and short-term gold prices continue to face significant challenges.

　　Although the media have been increasingly pessimistic about 2017 gold price forecasts, the best indicator remains the successful investor Soros—every move he makes speaks louder than a thousand words: he’s kept his money in his own hands.

　　In 2015, Soros amassed a large position in gold. In August 2015, when the price of gold was around $1,100 per ounce, he purchased 1.9 million shares of Barrick Gold, the world’s largest gold producer. In April 2016, he stated that gold was the only commodity performing exceptionally well at the time, and his conviction guided his actions. Several months later, as gold prices nearly reached multi-year highs, Soros Fund Management reduced its holdings of Barrick Gold shares by 263.7 million shares—or 94%—locking in substantial profits. Additionally, the firm also reduced its stake in the SPDR Gold Trust. By choosing the right timing, Soros reaped enormous profits and proved to be an extremely successful speculator.

　　After liquidating his gold holdings and reaping substantial profits, Soros has now doubled his stake in Barrick Gold. In the third quarter, the Soros Fund purchased 1.78 million shares of Barrick; according to regulatory filings, its total holdings now stand at 2.85 million shares. Last year, Soros’s gold price forecast triggered a massive sell-off of gold, thereby demonstrating both the accuracy and practicality of his prediction. His current position—holding four times as much gold as before—undoubtedly serves as the strongest evidence of his bullish outlook on the gold market; as a result, predicting gold prices may well become unnecessary. His large-scale acquisition of gold reflects his confidence in his own experience and judgment.

　　Perhaps the question investors are most concerned about is: At what price and under what circumstances is it appropriate to buy gold?

　　In any case, let’s just wait and see.

　　(Author of this article: Zhan Zhenqun, President and Chairman of Century Global Commodities Co., Ltd.)