Good Signs for Gold
The gold market is a unique force in the trading world, as it tends to operate somewhat under its own rules and forecasts. As a result, we need to analyze the market independently and forecast what may come.
Right now, that forecast is very positive, partially because of good early indicators for high demand in 2019. 2018 was a weak year for gold demand, with consumers asking for under 1 million ounces of the precious metal throughout the year. That number plummeted form a 2016 peak near 3 million ounces.
But the calendar change did the gold market a world of good. Sales of both gold and silver jumped to two-year highs in the month of January, which is a great sign, despite a subsequent slump in February. But the early indicators suggest a strong rebound from the paltry numbers in 2018.
Demand for precious metals should be further boosted by uncertainty, and there is plenty of that politically. Two major factors are the uncertainty surrounding the United Kingdom’s potential exit from the EU (Brexit), as well as the expectation that the U.S. Federal Reserve will halt their increases in interest rates. These two situations mean good things for the gold and silver market.
This news, combined with the diminishing value of the dollar, has left some analysts “uber bullish” on gold and silver.
Precious metals are a defensive play, they are a hedge against uncertainty in the markets and financial changes like inflation, diminished currency value, and other political uncertainties like the ones discussed above.
In the longer term, there is plenty of political uncertainty to be had, especially in the U.S. Markets. The U.S. is already totally enmeshed in the buildup to the 2020 Presidential elections, and that will reach a fever pitch once the calendar changes over.
Election years have been good predictors for the gold and silver markets in the past. Remember the 2016 peak of almost three million ounces of demand? That wasn’t all because of the medals at the Rio Olympics.
Nothing is ever certain in any market, but with gold and silver, uncertainty is usually a good thing. In the coming years, uncertainty abounds.