Gold prices today (Thursday) were mostly flat, meaning gold prices are now on pace to log their third consecutive annual loss.
In early morning trading of the last session of 2015, spot gold prices today were trading higher by $1.10, or 0.1%, to $1,062.10 an ounce. That followed an $8.20, or 0.8%, decline to $1,060.10 an ounce Wednesday.
Year to date, gold prices are down 10.5%. Gold is now poised to finish 2015 close to the near-six-year low of $1,045.85 it hit in early December.
Gold prices started the year at $1,172.50 an ounce and traded as high as $1,300.70. But a stronger U.S. dollar, prospects for higher interest rates, and a slowdown in China all pushed gold prices down in 2015.
The dollar is on track to end this year with a 9% gain against a basket of major currencies. The euro is lower by roughly 10% against the dollar since the start of 2015.That has made dollar-denominated gold more expensive for foreign buyers.
Many forecasts call for continued strength from the dollar as well as additional rate hikes from the U.S. Federal Reserve in 2016. Those two stories will have major impacts on gold prices throughout 2016.
Several traders and brokerages are predicting a drop in gold prices to $1,000 an ounce or below early next year.
And the actions of the Federal Reserve will be closely watched by gold investors...
When the Fed raised interest rates for the first time in nine years on Dec. 16, committee members said they will implement a series of gradual interest rate increases in 2016. That could cause some investors to sell gold and buy yield-bearing assets such as equities, Treasuries, and bonds.
Other fundamentals also paint a bearish picture for gold prices.
Assets of the SPDR Gold Trust ETF (NYSE Arca: GLD), the leading gold-backed exchange-traded fund, sit near seven-year lows. Meanwhile, short positions on COMEX gold contracts are close to a record high.
But it's not all doom and gloom for gold prices today and in 2016.
As the Fed's monetary policy path becomes clearer, gold prices could see some stabilization.
Bargain hunters and safe-haven investors seeking diversification could also boost gold prices. And if precious metal traders start covering those near-record-high short gold contracts, gold prices will rally.
"As we've seen before when you have a couple of big down days or years, the next could be pretty attractive because prices are down," Phil Flynn, senior market analyst with Price Futures Group, told Kitco. "So we're looking for a rebound in the new year."
Money Morning Resource Specialist Peter Krauth says 2016 promises to be a pivotal year for gold prices. He's keeping a close eye on both influences and developments in the gold market as we head in 2016.
Stay tuned to Money Morning for continued coverage on gold prices today and in 2016...
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