Gold demand stands to benefit from the impending interplay of market risk and economic growth, consequently driving up its price, according to the WGC report Outlook 2019: Economic Trends and Their Impact on Gold.
The sector faced major challenges for the majority of 2018, but shifted positively towards the last quarter driven by a stronger US dollar, Federal rate hikes and a better-performing US economy.
“These factors fuelled positive investor sentiment which, in turn, pushed US stock prices higher, at least until the start of October,” the report stated.
The WGC expects many global dynamics seeded over the past two years and risks that emerged later in 2018 to carry over this year, triggering a set of trends that will be key in determining gold’s demand over the short and long term.
Gold also outperformed most global assets by the end of 2018. The WGC believes increased market uncertainty and the expansion of protectionist economic policies will make gold increasingly attractive as a hedge.
According to the WGC, gold will face headwinds from higher interest rates and US dollar strength, but this is expected to be limited as the Fed signaled a more neutral stance and structural economic reforms in key gold markets to continue. This will support demand for gold in jewellery, technology and as means of savings.
The report stated global investors would continue to favour gold as an effective diversifier and hedge against systemic risk. However, this comes with higher levels of risk and uncertainty on multiple global metrics – such as expensive valuations and higher market volatility – political and economic instability in Europe, potential higher inflation from protectionist policies, and increased likelihood of a global recession.
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