Precious metal investors have been waiting patiently for some acceleration in the price of gold. Unfortunately, it has behaved anemic the past few years trading range bound between $1150-$1350/ounce - just briefly peeking its ahead above $1350/ounce a few months back.
What is next for the shining yellow metal? I believe for the short term at least, more of the same. Gold inversely trades with the price of the $US. Then it basically becomes a play on the movement on the dollar. Secondly, there is a supply and demand component.
According to Gold Hub, “supply from gold mine production grew 3% y-o-y in Q2 – from 811.4t to 835.5t – the highest Q2 on our records.”
https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2018/supply And according to Kitco: Gold demand in the first half of the year dropped to its lowest level in 9 years while the global market declined 4% in the second quarter, according to the latest report from the World Gold Council.
https://www.kitco.com/news/2018-08-02/Global-Gold-Demand-Falls-4-In-Q2-But-Long-Term-Trend-Remains-Positive.html
Frank Holmes comments in his article titled, India’s booming economy is set to firm gold prices, “India’s economy is advancing at the world’s fastest pace right now. I believe this should have a positive effect on gold demand in the long term as the size of the country’s middle class expands. The International Monetary Fund (IMF) recently predicted the Indian economy this year to grow 7.3 percent, or 0.7 percentage points over China’s anticipated growth rate and an incredible 2.6 percentage points over emerging and developing economies on average. Next year India is expected to grow even faster, at 7.4 percent. What’s more, India’s billionaire wealth increased 36 percent in 2017, according to a recent report by UBS. The number of billionaires in India rose by 19 to 119 in total. Again, I expect this to have a noticeable impact on gold demand, the greater this wealth builds.”
https://stockhouse.com/opinion/independent-reports/2018/11/07/india-s-booming-economy-expected-to-firm-up-gold-demand
The appetite for gold in India is not expected to wane anytime soon or even ever. Rather with India’s burgeoning economy, the demand for the precious metal should increase. China is also garnering a similar appetite for gold as India covets. The relatively new found love for gold by the world’s largest population bodes well for the price of gold both in the medium and long term.
Another initiator in an increase in the price of gold might be a huge decrease in the overall stock market. This was relatively true during the 2008 crisis but most precious metals stocks fell with the overall market so this is something to be wary of.
If there is a major gold discovery, this may propel the anemic industry into having more energy. It has been sometime since the market has experienced such a discovery.
It seems like investors of gold and gold stocks may need to exercise more patience as it may be just a matter of time before they will be handsomely rewarded.
Happy Investing!
Dr. Kal Kotecha
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