Brexit turbulence, growing populism in other EU member countries and in particular the US-China trade war, were in line with my expectation that the gold price will be driven by the turbulence on the global financial markets, rather than by growing physical demand.
Nevertheless, instead, after having reached a high of $ 1,360.25 on January 24, 2018 and a low of $ 1,176.70 on August 17, 2018, as a result of an ongoing decline in physical gold demand, it was not earlier than in the third quarter that the gold price recovered to $ 1,281.65, thereby almost fully recovering to the year-end 2017 price of $ 1,297, and as such not reflecting a growing turbulence on the financial markets on balance yet.
Therefore, this does not change my view, that it will not be if but when the gold price will benefit from the named external factors, that, I expect, will chock the financial and commodity markets this year, following volatile stock markets in December 2018 and feeds my 2019 gold price target of $ 1,360 - 1,400.
Considering structural stronger US economy and higher interest rates compared to Germany, France, the UK and Japan and the dollar’s dual monetary function with China’s yuan, and also noting China holding $ 1,000 billion of its $ 3,000 billion monetary reserves held in dollars, which makes the US and China currently committed to each other.
Also, it is to be observed that Western worries about the sustainability of China’s economic growth are strongly overvalued with a target GDP growth rate of at least 6%, and this target for 2019 to be supported by a major economic stimulus package be worth US$ 218.5 billion. This stimulus, I expect, will lead to a strong recovery of basic metals prices, led by copper.
General market comment
- Gold price cannot only rely on fundamentals in 2019, but will benefit from deepening global geopolitical turmoil
- European Union falls apart as a result of Brexit and rising populism.
- Gold demand in Q3 2017 at 964.3 tonnes, just 6.2 tonnes higher year-to-year.
- Lion's share of Central Bank net purchases limited to three emerging countries
- Global gold-backed ETF holdings grew 3% in 2018
- Gold-backed ETFs as of year-end 2018
- Market conditions generally unfavorable for producer hedging
- Gold supply in Q3 2018
- China's gold production under pressure
- Gold from the fundamental perspective of supply and demand over the period 2012 - 2018.
- Western Central Bank gold holdings compared to non-gold monetary reserves
- Total Monetary reserves and gold holdings of Western countries compared to emerging countries
- Gold and monetary reserves Western countries, Asian countries and notable other countries
- China's S debt-holder strategy helps to secure future economic growth
- Newmont Mining and Goldcorp create world's leading gold company
- Barrick Gold - Randgold merger strengthens New Barrick's position as world's second leading gold company
- Market valuation of the world's top 20 gold producers