Are you going to buy a gold ring? Or a gold bracelet? Or do you want to invest in gold? Then you should read this article ♦ ︎
Let’s talk about yellow metal. Indeed, of the price of gold. It is an aspect that affects both those who produce jewelry or intend to buy gold jewelry, and those who want to invest part of their savings in gold, perhaps in ingots.
If you are part of these two categories (jewelry buyers or investors) you are also interested in the World Gold Council forecasts. We immediately explain that the World Gold Council is the organization that deals with the development of the market for the gold industry. The purpose of the association “is to stimulate and sustain the demand for gold, to provide leadership in the sector and to be the global authority in the gold market”. In short, that of the WGC is not a disinterested opinion. But the analysis that the World Gold Council periodically publishes is also rich in information and market indications. So it is worthwhile to be informed.
The four gold gear
So, what will be the price of gold in 2018? Will the jewels cost more or less? And should you invest in gold?
First of all we must know that the price of gold is determined by four factors: the first is the trend of the dollar, the currency with which they generally buy or sell gold on the markets. The second element is global instability: when fears are waged, everyone runs to buy gold and the price goes up. The third factor is, of course, the price of gold compared to other forms of investment. When the price drops it is cheaper to buy it. Finally, the fourth factor is linked to the cash flows conditioned by the international financial situation.
Regarding the first element, the World Gold Council links the trend of the dollar with the tendential increase in interest rates in the US. According to them, however, “the correlation between gold and US rates is decreasing”. And again, “higher real rates have not always led to negative gold yields”. In short, from this point of view the price of gold should not undergo excessive changes. Although we must not forget that the cost of gold continues to rise: it has risen by 8.5% since the Federal Reserve, in December 2017, started raising interest rates. But what matters most: the dollar price against the euro or interest rates? Answer: the dollar. “But there are exceptions”.
Then there is the global instability factor. According to the WGC analysis, “a period of increased geopolitical risk, which has a potential impact on the global economy, could support gold even if the dollar strengthens. Therefore, we believe that investors benefit from the allocation of a strategic allocation to gold as a source of return, diversification, liquidity and portfolio impact “. Translated: the fear for the various wars and tensions (Syria, terrorism, tariff war with China) can attract gold investors even if US interest rates increase.
Conclusion: in the coming months the price of gold should remain stable or tend to rise. We’ll see if the predictions are right. Federico Graglia