Gold Focus 2019, a new report from research outfit Metals Focus, has laid out a strong case for stronger safe-haven demand and higher gold prices in 2019.
“Conditions are now becoming more supportive for a late-2019 rally,” the report said. “We see prices testing the $1,400/oz mark.”
This would represent about an 8% price increase from gold’s current level of $1,292/oz (as of 10:32am today).
TD Securities also sees gold prices rising to $1,360/oz within three months and then on towards $1,400/oz next.
ANALYST RESEARCH POINTS TO HIGHER GOLD IN 2019
Why are analysts forecasting a positive long-term outlook for gold in 2019?
1) The Federal Reserve’s surprisingly dovish shift on rates
Only a few months ago, the Federal Reserve was saying that growth was too hot and raising rates to compensate. Now they are suddenly canceling plans for more rate increases and talking about the dangers of slowing growth around the world. This creates investor uncertainty that can drive demand for safe haven assets like gold.
Metals Focus Comment: “Recent comments from Fed officials suggest that U.S. policy rates will remain unchanged for the foreseeable future. This in itself should be positive for gold, as it should encourage investor interest in safe-haven assets.”
2) Global growth is slowing fast
The Federal Reserve has made it clear they believe global growth is slowing. If this turns out to be true, slower growth could mean stock markets under pressure as companies find it increasingly hard to grow and invest.
Metals Focus Comment: “Starting with the U.S., market consensus … is that real GDP growth will slow both in 2019 and 2020 … Elsewhere, euro-zone performance has (at best) been sluggish and tail-risks in the region abound.”
3) More geopolitical drama on the horizon
Retirement investors are facing a host of scary issues that could send shock waves of uncertainty into the markets at any time. Here’s the short list: the Brexit rollercoaster, political instability in the U.S., Middle Eastern tensions and a possible breakdown in North Korea denuclearization efforts.
4) Gold demand is outstripping supply
Globally, gold supply is only expected to increase about 1% in 2019, at a time when industrial and investment use are on the rise. Jewelry fabrication is expected to rise 3% in 2019, while the electronics sector is also using more gold in consumer cell phones and tech, flash drive memory and cars. Investment demand in India is rising fast, supporting gold prices globally.
Metals Focus Comment: “The largest increase [in safe-haven investment buying of gold] comes from India, whose 7% gain is based on the government’s focus on improving farm incomes, coupled with tax breaks for the middle class.”
5) Central bank buying should remain strong in 2019
Higher demand from central banks in Europe, the U.S. and China especially drove buying in 2018 to its highest level since the 1970s! Experts think central bank gold buying won’t equal that amazing peak in 2019, but expect it will still be robust.
Metals Focus Comment: “We expect net official-sector buying to remain historically high in 2019.”
GOLD COIN SALES RISING FAST IN 2019
According to a Commerzbank report issued this week, gold coin sales in the U.S. are up 30% in the first quarter of 2019 versus the same period in 2018.
Safe haven buying seems to be a strong factor here.
We’ve observed a big increase in mainstream awareness of the role of precious metals as diversifiers for retirement portfolios, plus there is increased market volatility. Callers seem to be much better informed about gold when we speak to them compared to even just one year ago!
It really is no surprise.
When markets get rough, that tends to send investors straight to gold to reduce volatility and lower stock market risk exposure.
Frank Holmes, the famed CEO of U.S. Global Investors, agrees with the U.S. Federal Reserve that global economic growth is slowing. This has historically provided a boost for gold prices.
Holmes is currently recommending up to a 10 percent portfolio weighting in gold.
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