Gold prices expected to hit 5-year high in 2018 on geopolitical uncertainty

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Gold in 2018 will deliver its strongest annual price performance in five years, GFMS analysts forecast, as political uncertainty drives investment in bars and bullion-backed investment funds.

The GFMS metals research team, a unit of Thomson Reuters, predicted gold would average $1,360 an ounce this year, up 8 per cent from 2017, with some short-term moves towards $1,500. Gold has not risen above that level since early 2013.

“Uncertainty revolving around President (Donald) Trump’s politics, along with ongoing tensions in the Middle East and Brexit negotiations will remain gold’s key drivers,” the team said as it released its Gold Survey 2018.

The team expected demand by exchange traded funds (ETFs) to rebound this year to 350 tonnes.

“Retail investment is forecast to rise in 2018 following four consecutive years of declines, thanks to a pick-up in bar demand, supported by improving sentiment towards gold and rising price expectations,” GFMS said.

Adding to the bullish picture, the Chinese central bank was expected to resume purchases, GFMS said, leading to a rise in net official sector demand this year to more than 400 tonnes for the first time since 2015.

“Retail investment is forecast to rise in 2018 following four consecutive years of declines, thanks to a pick-up in bar demand, supported by improving sentiment towards gold and rising price expectations,” GFMS said.

The improving sentiment over the economic outlook, particularly in the United States, have investors less interested in gold coins as their risk appetite increased.

Mine production edged lower last year for the first time since 2008, GFMS said, totalling 3,247 tonnes. In 2018,  mine output is expected to hit a record 3,265 tonnes.

“We expect Asian countries such as Indonesia, Mongolia and China to contribute to gains in the current year, accompanied by Russia, Australia and Canada,” the survey noted.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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