Drop in Gold Prices to Push Demand
Normally, if the price of something special falls, demand rises. The World Gold Council (WGC) believes that demand for gold will be spurred by other economic factors as well. The price of gold is going north, at least according to the WGC’s analysis.
The organization’s reasoning:
The gold price fell below US $1,300/oz, the first time it has been at these levels since June 2016. We believe this price drop will likely result in physical buying.
The need of central banks to continue to fix faltering major economies and worry about uncertainty about the future of the developed world will be factors:
We believe that a shift in monetary policy need not signal lower gold prices. The price dip will likely result in physical demand from consumers, long term investors and central banks. The broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.
In other words, gold is a sort of investor’s safe haven.
Even with a pullback in price, the WGC points out that gold has been an excellent investment this year, only exceeded by the price of oil. Gold’s return has been 20%, against, for example, U.S. stocks, which have been closer to 7%.
Finally, the WGC argues:
Market fluctuations will naturally occur from time to time, but the fundamental environment for gold remains strongly supportive. The broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.
Investors can keep it in their homes, banks or vaults and know they have access when they need it.