Mumbai: The World Gold Council (WGC), In its ‘2019 Outlook’ report said geopolitical risks that weighed on global economic growth in the second half of 2018 would likely carry through to 2019. That uncertainty would be a boon for gold prices, as investor demand is expected to fire up for gold’s effective hedging role.
Although the WGC did not weigh-in on the specific price movement potential for the yellow metal, its analysis came at a time when gold prices have been holding steady near six-month highs and are ostensibly aimed at the US$1,300/oz mark. Spot gold traded at $1,287.60 in New York on Friday.
“We believe that in 2019 global investors will continue to favour gold as an effective diversifier and hedge against systemic risk. And we see higher levels of risk and uncertainty on multiple global metrics,” the WGC said.
The outlook contrasted with gold’s price performance in 2018, which saw significant headwinds such as a strong greenback, successive rate hikes by the US Federal Reserve, as well as accommodative policies from other central banks. The US economy was further boosted by the Trump administration’s tax cuts, which helped fuel positive investor sentiment and pushed US stock prices higher through to the start of October.
However, the WGC said as geopolitical and macroeconomic risks increased, emerging market stocks pulled back and developed market stocks ultimately followed.
This resulted in short-covering in gold, with its price ending the year near $1,280/oz, outperforming most global assets, the WGC said, despite reflecting a 1% year-on-year price decline.
Increased market uncertainty and protectionist economic policies were expected to make gold more attractive as a hedge, but higher interest rates and US dollar strength impacts would be muted because of the Fed’s more neutral stance.