Throughout history, gold has been viewed as one of the most precious metals. Gold is desired for its rarity and unique properties; its limited supply makes it a great store of value when the value of other currencies or assets is manipulated.  For over 5000 years, gold has been a popular safe haven investment. Investors usually acquire gold for diversification or to store wealth through derivatives and futures contracts, or even physical gold.  Like other markets, gold prices are subject to volatility and speculation, though it has long been observed that when other assets have gone down in value, gold has gone up, making it an excellent hedge fund. Until recent times, gold had been used in certain regions and countries as money. Its use as a form of currency dates back to at least 550 BC, a time when King Croesus of modern-day Turkey minted gold coins. However, in the late 1800s, the adoption of gold standards by major nations in the world cemented its value to then-modern finance. It has since mostly or completely stopped it’s use as a circulating currency, though countries, banks, and governments (as well as individual investors) still hoard gold as a form of wealth storage.

History Of Gold Prices

The Federal Reserve  was established in 1913 to ‘aid’ in the stabilization of gold prices and currency values, creating a national US currency (even though the founding fathers of the United States warned against ever establishing a Central Bank, seeing the evils it could cause). In the 19th century, several European countries implemented the gold standard until they got suspended in the wake of the financial crisis after World War II. Later, the Bretton Woods agreement led to the re-adoption of the gold standards as the post-war rebuilding process started. For the better part of the last century, gold was pegged below $200 oz.

The gold standard was entirely abolished in 1971 to pave way for new fiat currencies. Though this move was thought to mark the end of gold’s glory, the geopolitical concerns and inflation in the 1980s led to a spike in the price of gold to a new record high of $400. However, the rally didn’t last, prices languished for the following two decades. In 1999, Central Banks began selling their gold reserves owing to the changing financial landscape and the take-off of credit expansion. This led to a fall in gold prices to $251 per ounce.

In the new millennium, Central Banks throughout the world slowed their gold-selling spree; this saw a steady return of its demand. Perhaps the biggest price gains began in 2008 following the financial crisis, that was caused by quantitative easing undertaken by major Central Banks. By September 2008, gold’s price had soared to $878 oz as Central Banks began rebuilding their gold reserves again.

The biggest rally in history came in the wake of the Eurozone debt crisis of 2011. The potential breakout of the eurozone and deliberations on possible bailout saw investors rush for gold. As a result, prices touched a staggering high of $1,921 oz. However, as fear receded, the prices of gold steadily fell again, until a low of $1,094 oz in August 2015.

A year later, in what is popularly termed as “Brexit,” the UK took a vote to leave the European Union, to be free from it’s unelected bureaucratic nightmare. The uncertainties of this possible fallout sparked yet another gold rush that saw the price of gold hit a high of $1,358 oz in June 2016.

Gold’s Price Forecast

To understand the future changes in gold’s price, it’s imperative to know the factors that could influence the demand for gold. Its demand largely comprises 5 blocks:

  1. Demand from the jewelry industry
  2. Investment demand
  3. Purchases and sell offs by Central Banks
  4. Industry demand
  5. Economic unrest

These demand factors will play a key role in driving the prices of gold in 2018 and beyond. Supply of gold has been quite stable. Increase in the price of gold would likely result in higher recycling activity whose effect on the price rise would be minimal. Return into the exploration activities that were muted years ago will likely take quite a significant amount of time to create a notable impact on gold’s prices; hence we’re not likely to see any price trends triggered by the supply side – unless perhaps exploration continues.

Geopolitical Risks Potentially Influencing Gold’s Prices

The decision of UK voters to exit the EU in 2016 was a huge surprise to many. The relationship between the EU and the UK is still quite unclear. A rise of nationalism, is upsetting a very long, dangerous, and unwarranted, move to globalism by an elite few. As a result, there could be some economic uncertainty in the transition. Despite fake news about the US President Donald Trump, for example, stock markets are at an all time high, and jobs are on the rise. It appears the people aren’t too keen on the globalism that’s been shoved down their throats to their own detriment. But, with liberally biased, mainstream fake media, and an established and determined global network of tyrants, willing to do anything to establish a new world order, economic unrest is quite possible to continue, all of which could affect gold prices.

Conflict in the Middle East and in Asia is also another potential gold mover. The increased aggression between the US and North Korea could escalate into a military conflict at its worst, with the unstable Asian dictator threatening world safety, and the US President taking a strong stand & ceasing failed US policies that led to this moment in the first place. The United States and Iran also have unsettled scores, in the wake of the atrocious and dangerous Iran Nuclear Deal under Obama, a manifestation of dire geopolitical risks that could have a huge positive impact on the short-term growth of safe haven assets such as gold.  

Gold Price Predictions:

As of the 6th of January, 2018, gold’s spot price traded at $1,355.30. Several analysts from major financial institutions have published their forecasts of gold prices in 2018 and beyond, both bearish and bullish. According to CNBC, the elevated geopolitical tension that could spill over into the next few years is likely to push gold prices higher. They foresee a steady rise in prices to $1,400 for sustained periods through 2020. The World Bank Commodity Price Forecast issue held that gold prices in 2018 are expected to hover around $1,206 per ounce. The World Bank expects the continuing fall to extend until 2030 when the prices fall to a low of $1,000 oz. Goldman Sachs, an investment bank, agrees with the World Bank’s 2018 price forecast. Goldman predicts a fall in the price of an ounce of gold to $1,200 by mid-2018. However, the bank expects the prices to bounce back to $1,375 by end of 2020 catalyzed by the growth in demand in emerging markets.

Canada’s Scotiabank also released its forecast, which was almost similar to Goldman Sach’s. The bank expects 2018 prices to idle around $1,200 for the better part of 2018. On the other hand, ABN AMRO predicts a recovery of prices in 2018 citing high jewelry demand from China as an incentive for investors to re-invest in gold, consequently pushing price recovery to $1,300 by the end of 2018.

It is important to note that analyst forecasts vary widely, ranging from substantial increases to huge declines. The future is not as easy to predict, and investors will remain trying to judge factors that feed into the demand for gold, mostly owing to the fact that gold has seen times of extreme price volatility. It’s up to the gold buyer to do their own research, and to see who’s reasoning they agree with more.

Digital Gold

Nonetheless, gold has outdone coins, paper currency, and other assets in maintaining its worth throughout the ages, and will certainly preserve its value into the future. People will continue using gold to preserve and pass wealth down to other generations. Nowadays, you do not need to buy physical gold: you can easily acquire digital currencies pegged to the gold spot price. DinarDinam provides an easy way for people to own their gold in a digital format. Visit our main page to learn more about our digital gold products, such as our DinarCoins and Gold Smart Contracts, as well as the benefits of owning digital gold. If you need a convenient place to store and use your digital gold, we recommend the advanced and secure, multi-asset, digital wallet app: blockchains.my.  

The Information and content in this article is solely for informational and entertainment purposes, and may or may not be entirely accurate. We make no representations, or guarantees, whether express or implied, that the content herein is accurate or complete. We are not investment specialists or financial advisors, and should not be taken as such. Any investments a person may decide upon after reading this article is strictly of their own volition, and any results are 100% their responsibility.


References:

http://www.cityam.com/255196/short-history-investing-gold-and-expect-2017

http://www.cityam.com/company/federal-reserve

https://www.federalreservehistory.org/essays/gold_convertibility_ends

https://www.canstar.com.au/home-loans/global-financial-crisis/

https://www.forbes.com/sites/robertlenzner/2011/09/30/europe-in-2011-a-worse-crisis-than-the-u-s-in-2008/

http://www.e-mj.com/departments/markets/6301-brexit-pushes-gold-prices-higher.html#.WlDv3nn7LIU

https://www.trustablegold.com/2018-gold-price-forecasts/

http://www.thehindubusinessline.com/markets/gold/gold-hits-10month-high-in-the-wake-of-north-korea-nuclear-test/article9842787.ece

https://www.cnbc.com/2017/11/20/new-normal-of-geopolitical-risk-likely-to-boost-gold-prices-in-coming-years-citi-forecasts.html

http://pubdocs.worldbank.org/en/662641493046964412/CMO-April-2017-Forecasts.pdf

https://www.trustablegold.com/gold-price-forecast/

http://www.gbm.scotiabank.com/English/bns_econ/forecast.pdf

https://insights.abnamro.nl/en/2017/08/precious-metals-watch-out-of-rhythm-now-what/

http://www.bbc.co.uk/ahistoryoftheworld/about/transcripts/episode25/

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