Gold is proving its evergreen commodity status. Currently priced
at $1,358 per ounce, it’s defying expectations by maintaining its price,
showing consistency not found since July 2016. What’s more, gold is predicted to keep rising by
Goldman Sachs, who have this week asserted that it will continue to outperform
other commodities amidst fears over a market correction.
The shifting political landscape and rocky future outlook are
creating problems for many markets, making securing a good investment a
difficult proposition. Bucking the trend, gold is arguably profiting from
global changes to its own benefit.
Trade wars and improving outlooks
The past month has
been dominated by headlines concerning a trade war as hostilities ramp up
between the USA and China over perceived transgressions. Typically, this would
create uncertainty between the markets. Take the unexpected Brexit vote over in
the UK; the result wiped $2tn off stock markets in panic. However, if
you check the gold price at Money Metals
Exchange it becomes apparent
that gold continues to grow, never dropping under $1,000 since before 2010 and
growing $5 per ounce on the back of the announcement of Trump’s China tariff. The reasons for this are
varied, but Bloomberg have detailed how gold investors have out-thought
hedge funds, demonstrating confidence in the commodity - despite
political uncertainty.
The power of inflation
For the first time since late 2008, inflation is set to rise far
above the 2% guideline in America. Reuters have explained the reasons behind
rising inflation, and they shed a little light on the bullish price of gold
bullion. With inflation rising, the price of the US dollar drops. In turn, gold
- which is closely tied to the US dollar - becomes far more affordable, as do
other related luxury markets such as tourism. If the dollar continues to fall
amid inflation, gold will continue to rise in the absence of an interest rate
lift.
The growth of related markets
Inflation is being driven up by increased employment, and
generally speaking there is more money in the US right now. The result is
growth in related markets, paired with increased global international
connectivity. More people are able to purchase items more of the
time, and in increased numbers. Retail consultants McKinsey have predicted a
global growth in the jewellery market to $250bn by 2020, up from current sales
of $148bn. This results in increased demand for gold, and particularly good
quality gold as people have more income to spend.
Gold is one of the oldest traded metals in the world, creating
the foundations of many currency systems globally. Still today it creates a
wonderful part of the portfolio of many canny investors.