In the same category

WGC’s Outlook for 2017

IMG Auteur
Published : January 18th, 2017
712 words - Reading time : 1 - 2 minutes
( 1 vote, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
[titre article pour referencement]
0
Send
0
comment
Our Newsletter...
Category : Gold and Silver

Last week, the World Gold Council presented its outlook for the gold market in 2017. What can we learn from the publication?

The WGC points out six major trends that will support demand for gold throughout 2017: 1) heightened political and geopolitical risks; 2) currency depreciation; 3) rising inflation expectations; 4) inflated stock market valuations; 5) long-term Asian growth; 6) opening of new markets. Let’s analyze them one after another.

  • Heightened political and geopolitical risks. The authors believe that political risk is rising due to key elections in Europe, Brexit negotiations and uncertainty about Trump’s policies. Hence, gold will benefit from the safe-haven demand, they argue. However, most of the risks concern Europe, not the U.S. Moreover, the biggest threats, such as the Brexit referendum and the U.S. presidential election, are behind us. Moreover, the global markets showed a lot of resilience last year. Therefore, we do not argue that gold will not benefit from the uncertainty, but investors should not overestimate this impact.
  • Currency depreciation. The report argues that the ECB is likely to continue its monetary policy, leading to fears of currency depreciation and the strengthening of gold prices. It’s pure nonsense, especially that authors note that “monetary policy is likely to diverge between the US and other parts of the world”. If this is the case, then the U.S. dollar will appreciate, while the yellow metal will weaken.
  • Rising inflation expectations. According to the authors, an upward inflation trend will support demand for gold, by lowering real interest rates and increasing gold’s appeal as inflation hedge. However, gold is not the perfect inflation hedge. And the current inflationary trend seems to stem from the uptick in economic activity. Thus, real interest rates may not be lowered.
  • Inflated stock market valuations. The report believes that stock valuations are elevated, so gold will benefit as a portfolio diversifier. Surely, it always good to have some precious metals, but the current stock bull market hardly paints a picture of an euphoric exponential bubble. Only time will tell.
  • Long-term Asian growth. The authors argue that macroeconomic trends in Asia will support economic growth, driving gold demand. However, as we repeated many times, the Asian physical demand is not the driver of the price of gold. Instead, gold is a bet against the U.S. dollar, hence it rises when the U.S. economy struggles.
  • Opening of new markets. Gold is becoming more mainstream, as more and more pensions funds invest in the yellow metal. And the Shari’ah Gold Standard is a game-changer. Hence, the report believes that we will see a structurally higher demand. We welcome the rising popularity of the shiny metal as an investment, but it does not necessarily need to lead to higher demand.

Summing up, the WGC’s gold outlook for 2017 is bullish. It is not surprising, since the WGC is always bullish on gold, as it is the market development organization for the gold industry. The report points out six themes which are supposed to support the gold market this year. We suggest taking them with a pinch of salt.

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
Gold Trading Alerts
Gold Market Overview

Did you enjoy the article? Share it with the others!

Data and Statistics for these countries : Georgia | All
Gold and Silver Prices for these countries : Georgia | All
<< Previous article
Rate : Average note :5 (1 vote)
>> Next article
Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
WebsiteSubscribe to his services
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Take advantage of rising gold stocks
  • Subscribe to our weekly mining market briefing.
  • Receive our research reports on junior mining companies
    with the strongest potential
  • Free service, your email is safe
  • Limited offer, register now !
Go to website.