WGC: 2018 Set To Be A Positive Year For Price of Gold and Investors

– Gold expected to build on 2017 gains into 2018 despite headwind conditions

– Gold has gained more than 9% in the year-to-date

– Monetary policy and policymakers will continue to be “significant drivers of gold demand”

– Physical and structural market changes will support gold into 2018

– Goldcore has been at forefront of reporting on major developments in gold market and price

Gold’s had a tough year. This isn’t in reference to price. After all, it has made double-digit gains in some currencies and US Gold futures are up more than 9%. The precious metal has had some harsh criticism from the mainstream media and unfair comparisons to bubblicious assets, such as bitcoin and US equities.

Few have acknowledged gold’s impressive performance in the face of rising interest rates, tightening monetary policies and the ongoing equity bull market.

The World Gold Council’s Chief Market Strategist John Reade is optimistic that gold can carry on with its strong performance, well into 2018. Below, we outline how he expects gold to perform next year.

Monetary policy and Fed chairs

Monetary policy – and policymakers – will continue to be significant drivers of gold demand, given that the Federal Reserve (the Fed) is anticipated by many to hike rates further next year and start to allow its balance sheet to contract. The new staff roster may also change the way the Fed acts and communicates. Jerome Powell, nominated as the next Fed chair, recently aired his views on Fed communications and any changes that he makes could lead to a period of adjustment by fixed income and other markets. Other staff will change too, most interestingly the suggestion that Mohamed El-Erian – a known supporter of gold as an investment asset – may become vice-chairman. 

Jerome Powell will certainly be one to watch in the coming months. As we explained yesterday Janet Yellen is considered to have been successful in navigating the US economy. Powell is unlikely to rock the boat too much in the eyes of the FOMC but this does not necessarily mean great things for the global economy.

You can read more about the likely new Fed Chair Jerome Powell and our thoughts on what he will (or won’t) bring to the table.

Not just the Fed feeding the gold price 

Of course, it is not all about the US central bank. Over the next 12 months, we may see a slowdown in the ECB’s extraordinary monetary policy action, while even the Bank of Japan may dial back its quantitative easing. Finally, China could continue its efforts to rebalance economic growth and possibly de-leverage some sectors of the economy. 

Not only are central banks ones to watch when it comes to monetary policy but also when it comes to their influence on banking rules. This was something we’ve covered a lot this year, with the ECB’s proposal to end deposit protection as one of the most important stories of the year. It served as a timely reminder as to why keeping assets out of the banking system was more pertinent than ever.

This week we’ve had a rally of central bank announcements. The FOMC increased rates by 0.25% whilst the Bank of England maintained at 0.5%.  Both decisions were influenced by inflation rates. For the US, inflation remains ‘stubbornly’ low, whilst in the UK Mark Carney has been forced to explain the above target rate of 3.1%.

With inflation still subdued around the world, we see monetary policy tightening as likely to be gentle, but  there are risks, not least the Fed’s plann