With recent weakness in stock markets and uncertainty about the direction of the world economy due to the likelihood of a trade war, gold demand remains strong throughout the world. The reasons for that demand vary widely based on region, but no region is exempt. According to a recent Bloomberg interview with gold analyst Joshua Rotbart, some of the reasons for strong gold demand include:
- The heightened trade war leading to an increase in demand in China and the US;
- A hedge against inflation in Southeast Asian countries;
- Growing demand from emerging markets to invest in gold as a hedge against currency depreciation;
- A source of protection for developed country investors against whatever events might occur in the future.
With the US instituting tariffs against China, set to put tariffs against Mexico and India in place, and considering tariffs against Australia and the EU, gold demand should get an additional boost from US trade policies. That will continue to support demand in the US, EU, and China. European demand will likely continue to get a boost while Brexit remains unresolved, with demand from investors on both sides of the English Channel likely to rise. Even after Brexit, gold demand will likely remain elevated.
Given the fact that central banks such as the Federal Reserve are likely to cut rates as the economy continues to sputter, there’s every reason to believe that investors worldwide will continue flocking to gold. The inflation and currency depreciation that will inevitably result from the creation of more money out of thin air will wreak havoc on prices, sending the cost of living soaring.
And as Rotbart also points out, gold mining supply is insufficient to keep up with demand. Only gold recycling is able to help bridge that mismatch. But with more and more people keeping their smartphones and electronic devices for longer periods of time, and with rising tariffs making it more expensive to buy new devices, gold recycling may also begin to decline. That would signal a bullish future for the gold price.
This article was originally posted on Goldco.
