Gold in 2019

When it comes to the price performance of the precious metal, 2018 was a roller coaster ride; prices moved from the highs in early 2018 to the lows in September last year, after which they have been on an uphill track once again. Factors behind weaker price performance of gold in most part of 2018 were higher interest rates, a strong dollar, and rising equity market. However, in the last quarter, tumbling of global stock markets and the geopolitical and macro-economic risks gave the much needed breather to the prices.

Some factors point to continued recovery in gold prices. First, the change in Federal Reserve’s stance from monetary tightening to a more accommodative one, which is being followed by central banks across the globe.

Second is the rising demand. Gold demand increased steadily in 2018 by over 4 percent, year-on-year, but the main factor behind it was an interesting one; the year saw one of the highest central bank buying across the globe in 50 years. Central bank buying has continued in 2019 and the World Gold Council believes this buying spree will continue in times to come as a means to increase foreign reserves.

China, the largest producer of gold has been pushing its gold holdings in an attempt to shift away from dollar, and this aggressive buying by China is likely to support gold prices in 2019. This, along with continued demand for gold-backed ETFs has helped gold prices touch $1,247 per troy ounce in February 2019 – the highest in almost a year.

According to a survey by London Bullion Market Association (LBMA), the global authority for precious metals, there is a divided opinion for gold prices ranging between $1,150 to $1,475. The overall average is of a modest increase of 1.8 percent in 2019, but the wide spreads suggest that prices could sway in any direction. Eventually, what will determine gold prices in 2019 is increasing attractiveness of gold as a safe haven amid rising uncertainties; strengthening or weakening of dollar and gold demand in China and India.