Gold is set to rise substantially in 2018 as it becomes a question of “when rather than if, equities correct” according to Metals Focus’ annual gold report
Gold is set to overcome a number of market headwinds to rise to $1,450 an ounce by year end according to a report from research company Metals Focus. Their annual analysis of the gold market Gold Focus 2018, asserts that although equities continue to be preferential for investors recent volatility, geopolitical pressures and currency slides will allow gold to “break higher in the second half of 2018, potentially testing $1,450 before the end of this year.”
Expected rises in interest rates have already priced in by investors says the report, meaning gold will remain attractive. Additionally the recently resilient US dollar is not set to rise against gold according to Nikos Kavalis, director of Metals Focus: “Our view that prices will rise is based on our belief that the dollar will resume its secular downtrend. Real short-term rates will also stay negative for some time to come. The twin deficits in the US [fiscal and trade] will lower investor appetite for bonds and the yield curve may flatten further.” The report also details the potential for geopolitical uncertainty to push gold up, pointing to suggestions the US might pull out of the Iran nuclear disarmament pact.
Although equities (the stock market) continue a record growth bull run, recent volatility suggests a significant correction is due. As a result, the report specifies gold as benefitting from investor rotation as equity yields shrink and asset prices decline. If stocks suddenly start hemorrhaging value the safety of gold will become attractive, especially if it begins to rise in price following demand. “When rather than if, equities correct, we will still be faced with depressed yields,” said Kavalis. “At this point, investor rotation back into gold, even on a modest scale, should take it to around $1,450 by year-end.”
In addition to this the report also highlights a total demand rise in gold of 4% in 2017, spurred by Indian jewellery. Mining supply also rose last year, by 0.5% to mark a new record high, this is predicted to rise again, by 0.1%, in 2018.