If gold is anything to go by, investors are apprehensive about the state of the world. Volatile equity markets and fears of an international economic downturn have helped gold rally 10 percent from its August lows, bringing it among the strongest performing metals over that time.
It is an acute contrast too much of the previous two years, when rising US interest rates, a strong dollar and buoyant equity markets hurt gold bugs and the shares of miners such as Barrick Gold, Newmont Mining and Goldcorp.
And when there was a correction in US stocks in early 2018, the gold price did not benefit. Almost a year on, the main challenge is whether 2019 could prove a lucrative year to hold gold, which is commonly acquired as a hedge or haven by investors.
The volume of tangible gold in exchange-traded funds has risen to 71.9m ounces, close to the record high of 72mtouched in May 2018. Which, along with investors covering their speculation against gold, have helped the yellow metal’s price recover from the 18-month low of below $1,200 a troy ounce touched last August.
There are several reasons to consider why the gold price might burst through the $1,300 mark and advance higher. These include still-fragile stock markets; the assumption that the Federal Reserve will hold off from interest-rate increases this year, and a lower dollar, which makes the metal more alluring.
Rising US rates have been an impediment on gold since the metal gives no yield. Goldman Sachs, one of the most prominent banks in commodity markets, lifted its gold forecast last week and now predicts a gold price of $1,425 over the next year. And some investors expect rising concerns over US debt levels could only sharpen gold’s attraction.
The purchasing of gold by central banks is also at its highest level since 2015. As many authorities remain eager to diversify away from the dollar. However, the numerous disappointments for gold bulls over the preceding year have some wary. Gold has not transgressed the $1,300 level since June.