This high degree of "gold fervor" was highlighted by the fact that the net speculative positions in the precious metal whipsawed from near all time lows, to all time highs in just the first seven months of 2016.
Chart showing changes over time in the commitment of traders (CoT) net speculative positions in the gold futures market. Source: Investing.com
However, as it became clear that the sky wasn't caving in (at least in the near term), things began to stabilize and so too did the price of gold, which consolidated above US$1,300 until the end of September. October saw a change in conditions as market participants positioned themselves heading into the U.S. election, particularly in the currency markets where the U.S. dollar (USD) started strengthening significantly against its major trading partners. As gold price movements are typically inversely correlated to the USD, this ushered in the first period of real weakness in gold for the year with price breaking below the key support level of $1,300 before stabilizing around the $1,250 mark.
Then came arguably the defining moment of the year as Donald Trump defied nearly all polling data to comprehensively win the electoral vote to win the US Presidency. The market reaction to his election has been swift and decisive and we saw a clear "risk on" move in the markets, resulting in an unprecedented sell off in the bond market, causing yields to rise and the USD to breakout - both of which is typically bearish for precious metals.
Gold played to the script and we saw a swift move down through key support levels, resulting in an unprecedented 7 weeks in a row of falling spot prices between the election and Christmas, before rallying slightly in the final days of the year to finish just off 6 month lows. However, even with a terribly weak last quarter, Gold still managed to close the year at $1,151, up 8.5% for the year.
A summary of the key events that drove the gold price in 2016, and the price action that they caused is summarized in the chart below.