The World Gold Council believes 2019 will see an increase in demand for gold, which will subsequently drive prices up as the year goes on. The latest publication from the WGC stated that they “expect that the interplay between market risk and economic growth in 2019 will drive gold demand”.
The council believes a triple threat of greater market uncertainty, alongside a more neutral US Federal Reserve in 2019 and economic reforms in growing markets (such as China and India) will help improve demand for the precious metal this year.
Gold finished 2018 slightly down in value against the US Dollar, but reached record-levels in 72 currencies, as well as near-record prices for the Pound, Euro, Yuan and Swiss Franc. Gold also outperformed many rival assets, as seen in this chart below:
The World Gold Council had this to say about 2018:
“Gold faced significant headwinds for most of the year. The [US] Dollar strengthened, the Fed continued to hike steadily while other central banks kept policy accommodative, and the US economy was lifted by the Trump administration’s tax cuts. These factors fuelled positive investor sentiment which, in turn, pushed US stock prices higher, at least until the start of October. But as geopolitical and macroeconomic risks continued to increase, emerging market stocks pulled back. Eventually, developed market stocks followed, in a selloff led by US tech companies. This resulted in short-covering in gold with its price ending the year near US$1,280/oz (-1% y-o-y).”
Market uncertainty and protectionism looks set to benefit investment gold in 2019. The WGC believes gold’s traditional appeal as a hedge will be key, covering investors while nations pursue trade disputes (US vs China, US vs EU, EU vs China, UK vs EU…) or manage political issues such as Brexit, Spanish secessionism, Italy’s feud with the ECB, and French social unrest.
Volatility and more expensive valuations are seen by the council as a result of the greater uptake of protectionist policies. Countries are quickly moving to put themselves first and defy the level of globalisation experienced in the past 20-30 years, but this risks inflation through higher labour or manufacturing costs. There is a longer-term risk on economic growth too, and while some suggest there’s scaremongering and propaganda at work, the WGC sums up protectionism’s downside succinctly: “it is not without risk to restrict the flow of capital, goods and labour.”
You can read the full World Gold Council prediction for 2019 by visiting https://www.gold.org/goldhub/research/outlook-2019