Gold market bulls have been running and are likely to continue running. The yellow metal has been making news for higher prices and increased demand in recent times.
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In fact, 2017 has been a good year for gold; amid weakening dollar and uncertainty, gold prices have had a positive momentum. The Dollar Index, which measures the US currency against a basket of peers, has hit its weakest in more than three years, which means prices of commodities like gold move up.
World Gold Council’s latest 2018 Outlook for Gold also highlights how 2017 has been a solid year for gold, and the trend is likely to continue. The global market development organisation for the gold industry has highlighted the factors that supported 2017’s price gains in its recent report. One, as mentioned earlier, the US dollar weakened, supporting the US dollar gold price. The prices rose in various countries where the increase in China, India, and US were 3.5, 5.1 and 13.5 percent, respectively. Second, nervous investors poured money into gold to hedge against risk from increased valuations of stocks as they made new highs. Also, increased investment in gold in 2017 came as a result of increased geopolitical instability.
With Gold’s price trajectory intact, four key themes have been highlighted to influence gold’s performance, which will support demand and maintain gold’s relevance. First is the global economic growth, which increased in 2017 and is expected to continue growing in 2018. The four key economies US, Europe, India and China all have some positive projections. US and European economies have expanded, while the growth in China and India is largely by higher consumption and higher demand.
Second, there is space for tightening monetary policies across the economies during global economic expansion. The World Gold Council believes that the trends of record high asset, record low market volatility and heightened correlation of asset prices amid low interest rate environment with reverse as the economies move away from their expansionary policies. Gold can help investors as volatility and financial market risks increase.
Third, the bulls in the equity market might continue in 2018, which will continue to increase valuations of stocks. And again, investors would be happy to have exposure in gold.
Ad last, but not the least, increasing transparency and efficiency of the financial markets will bode well for gold as well. India, the second largest gold market might have its first exchange in 2018, whereas there are signs that Russia might lift its restrictions on gold investments.