Gold Market Commentary and Outlook

As we look ahead, we expect that the interplay between market risk and economic growth in 2019 will drive gold demand. And we explore key trends that will influence its price performance.

In 2017, investors added gold to their portfolios as incomes increased, uncertainty loomed, and gold’s positive price momentum continued. As 2018 begins we explore four key market trends and their implications for gold.

In 2016, investors around the world returned in large numbers to the gold market, as a combination of macroeconomic drivers and pent up demand kept interest in gold high. As we start the new year, there are some concerns that US dollar strength may limit gold’s appeal. 

This latest edition of our Investment Commentary examines gold’s performance in 2015 and explores the factors that may influence gold in 2016.

On Monday 20th July the gold price fell sharply, dropping 4.3% from its Friday closing price. This note explains what happened and counters some misconceptions.

Despite economic uncertainty in some regions, the gold price declined in the first half of 2015. While puzzling to some investors, this is consistent with market expectations that the risks could be contained. 

This edition of our Investment Commentary examines gold’s performance year-to-date and explores relevant macroeconomic factors that can influence gold’s performance into Q4 2014.

Gold is up by 9.2% so far this year. This surprised many market participants as most analysts predicted lower prices. Some investors took advantage of last year’s price correction to buy gold but investment demand has remained tepid. We consider that the current environment of high bond issuance, tight credit spreads and record low volatility continues to offer a prime opportunity for investors to add gold. In our view, gold can reduce overall portfolio risk and it is cheaper to implement than many volatility-based strategies.

We view the direction of the US dollar as well as the strength of Asian demand as key indicators of gold sentiment. Further, potentially reduced mine production at lower prices should, in our view, limit the downside. Finally, our research shows that gold should not be looked at in isolation but as part of portfolio and that a small strategic allocation can reduce the long-term level of risk.

We discuss the limitations of the most common arguments and contextualise gold’s price pullbacks. We examine structural shifts that gold market has experienced over the last decade resulting in a robust set of demand factors, very different from that seen during the 1970s.