2020: Global economic trends and their impact on gold, the report made
public by the World
Gold Council (WGC), is the market development organisation for the gold
industry. Their purpose is to stimulate and sustain demand for gold, provide
industry leadership, and be the global authority on the gold market.
outlook 2020 says Risk appetite amid high uncertainty! “We expect that the
interplay between market risk and economic growth will drive gold demand in
2020. In particular, we focus our attention on: 1: financial uncertainty and
lower interest rates, 2: weakening in global economic growth & 3: gold
price volatility. We also explore the performance of gold implied by our
innovative Gold Valuation Framework across various hypothetical macroeconomic
scenarios!” WGC said in report.
the outlook is: ‘generally positive implied performance for 2020!’ Gold rallied
by 4% in December 2019, increasing by an additional 6% by 7 January 2020. While
we believe that there are various reasons for this move, tensions in the Middle
East linked to the US-Iran confrontation ultimately pushed the gold price to an
almost seven-year high in early January.
comments by President Trump aimed to ease concerns, pushing the price down to
the US$1,560/oz-US$1,550/oz level as of 10 January 2020. Yet, gold still
remains still 2.6% higher relative to the end of 2019.4
expect that investor positioning related to this specific event will likely
influence gold’s performance in the near term. But over the medium term,
broader financial and geopolitical uncertainty and developments in monetary
policy will play a more important role.
example, using Qaurum, we analysed the performance of gold as implied by four
different hypothetical macro-economic scenarios provided by Oxford Economics. These
included, 1: a global deceleration (their base-case scenario), 2: a US-led
recession, 3: a more pronounced slowdown in China & 4: an economic
improvement in emerging markets.
result of the analysis suggests that, in general, gold may see a positive
performance in 2020. While some of the scenarios – with the exception of an
economic upturn in emerging markets – could result in lower consumer demand,
its dampening effect on price performance will likely be offset by potentially
robust investment demand on the back of deteriorating credit conditions and
stable to lower interest rates.
is important to note, however, that this is not a comprehensive list of
possible scenarios. Instead, they reflect key investor concerns as per Oxford
Economics’ Global Risk Survey. Therefore, hypothetically, improving market
sentiment – for example, a reduction on perceptions of risk, a lower likelihood
of further rate cuts by the Fed or other major central banks, or tighter
monetary policy through means other than rate cuts – could put downward
pressure on gold’s price performance relative to the scenarios currently