John Reade: "Buy Gold Before 2018"

Despite rising interest rates, a strong U.S. dollar and a persistent bull market in equities, gold managed to defeat the odds this year.

The yellow metal, up close to 9% this year, was the shining star of the glum commodities space.

For John Reade, chief market strategist for the World Gold Council (WGC) - there are several reasons why gold will continue to have an upward trajectory in 2018.

"Investor attention may have been focused on U.S. equity markets, technology stocks and crypto currencies this year, but gold still had a decent 2017, delivering double-digit growth in the first 11 months alone," Reade said in the latest edition of the firm's Gold Investor Report. He added, "Gold's range has been relatively narrow and, apart from the geopolitically-inspired move above US$1,350 an ounce in September, the moves have been extremely orderly."

In terms of financial market drivers, Reade said that monetary policy will continue to be a significant driver of gold demand in 2018 -- given that the Federal Reserve is likely to continue to hike rates and unwind its balance sheet.

The changing of the guard at the U.S central bank, with the arrival of Jerome Powell and the suggestion that known gold supporter Mohamed El-Erian may become vice-chairman, can have a positive impact on gold's direction, Reade noted.

But it is not all about the U.S. central bank.

The direction of the U.S. dollar is also vital when talking gold's direction. "If 2017 marks the end of a multi-year period of U.S. dollar strength, gold could benefit from that tailwind, unlike the headwind that it has experienced since 2001."

In terms of physical demand, income growth has been the most important driver of gold demand, Reade said.

Source: Bloomberg Pro Terminal
Trader-G.Bozhidarov

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