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Gold…What’s ahead in 2018?

by Henry Elfering |

Now that the crystal ball has dropped and the New Year has arrived, I was curious about the predictions for gold in 2018. We are living in such a chaotic time, that predicting the future, let alone the gold market, almost seems impossible. I ran across an article that caught my attention and I thought I’d pass along what the World Gold Council believe is ahead for 2018 the gold market.

Chief Market Strategist John Reade for the World Gold Council had the following to say:

"The Financial Market Drivers in 2018

 According to Reade, “monetary policy – and policymakers – will continue to be significant drivers of gold demand”. He explains that the US Federal Reserve (the Fed) is expected to “hike rates further next year and start to allow its balance sheet to contract”.

Over the next 12 months, Reade predicts a possible slowdown in the European Central Bank’s (ECB) monetary policy action. Additionally, the Bank of Japan may dial back its quantitative easing, and China could continue its efforts to rebalance economic growth and possibly de-leverage some sectors of the economy.

There are two other factors as potentially important for gold: first, the ongoing strength – or otherwise – of already expensive US equities. Second, the trajectory of the US dollar.

Physical Market Drivers in 2018

Reade explains that income growth is probably the most significant market driver for gold. This rests on the fact that, over the long run, it has been the most important driver of gold demand. Reade says that the WGC is optimistic for its outlook. Additionally, “China, the world’s largest gold market, has avoided the hard landing that many were predicting 18 months ago and is expected to grow at a fair clip in 2018, with the consensus forecast at around 6.4%”.

India is expected to be one of the fastest-growing countries in the world in 2018, expanding at an even faster rate than it did between 2012-2014.

Germany’s economy is expected to maintain its momentum and unemployment is anticipated to continue falling. Finally, the US jewelry market, the third-largest in the world, could benefit from continuing economic growth and high consumer confidence."

So there you have it, gold certainly looks strong and a sound investment for the coming year.

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