Starting from the third quarter of 2018, the price of gold demonstrates a steady growth. Over the past three months, it has increased by 3%, reaching a 7-month high. The demand for gold, as the most liquid asset, is increasing every day.
According to financial experts, the slowdown in raising interest rates of the Federal Reserve System will have a negative impact on the US currency, serving as a stimulating factor for the price of gold.
Many commodity market analysts have no doubt about the great prospects of gold and give positive comments on its price in 2019.
Demand for gold from the central banks
In 2018, the central banks of various countries actively purchased gold to stock up their internal reserves. The state’s gold reserve is created to stabilize the national currency, serving as insurance against a financial crisis.
By the end of 2018, the largest amount of gold was purchased by Russia – 273 tons, 22% more than in 2017. The state’s gold reserves increased by 8,8 million ounces, totaling 211192 tons of gold.
The gold market analysts believe that the trend of increasing gold reserves will continue in 2019, and being the "king of metals", its influence within the international financial system is bound to expand.
The chart indicates the total purchases of gold by the central banks of various countries for the period from 2010 to the first quarter of 2018. Last year, the net purchases of gold reached the highest level in three years.
What are the drivers of gold prices?
John Hathaway, Chairman of the Board of the US investment company Tocqueville Management, believes that the decline in production along with the slowdown in the US economic growth will lead to an increase of public debt by 5%, simultaneously weakening the dollar.
“Owning to the recession*, gold will only benefit in price given that it is the safest asset at times of economic instability, it effectively preserves personal capital from depreciation and helps minimize risks,” Hathaway notes.
Russ Koesterich, a financial specialist of the US investment corporation BlackRock, argues that the Federal Reserve System’s statement on the refusal to raise interest rates will become a powerful driver for the rise of gold prices.
The analyst provides an optimistic outlook for gold prices in 2019: “Against the background of the global economic slowdown and a weakening pace of the Fed’s policy tightening, gold will grow steadily, bringing a solid income,” the expert notes. BlackRock is certain that the purchase of gold is the best way to preserve personal capital in the long run.
George Gero, a managing director of the US asset management company RBC Wealth Management, believes that by overcoming the $1,300 per ounce mark, gold will stimulate a new wave of interest in 2019, increasing the capital flows in “gold” funds.
“Gold will receive a strong support from new investors, who will choose it as a safe asset for capital preservation,” the expert says.
According to the analysts of the market of raw materials, whose comments are provided in the article, the year 2019 will be very successful for gold.
Financial experts outline three main drivers of gold prices:
the US economic slowdown;
the fall of the dollar;
a refusal of the Federal Reserve System to raise interest rates.
Experts believe that this year, against the background of high political instability in the world, experienced investors and ordinary people will show more interest in gold. Those who have already bought gold have every chance of making high profits by the end of 2019.
Gold is the main source of Financial Security not only for entire countries, but also for every person. Personal gold reserves – a reliable protection of personal savings against economic risks and a stable source of extra income.
* Recession (in Latin “recessus” means retreat or recede) – a slowdown in the development of the country's economy or an uncritical decline in production, characterized by the lack of growth or decrease in the gross national product (GNP).