Gold Price Likely To Go Much Higher On Safe Haven Demand

Friday, August 19, 2016

rising gold prices

Gold has been climbing in the market throughout the year…and for good reason. Global economic conditions, central bank experiments and volatility in the market is all leading to strong safe haven demand. The big question is whether or not this will continue. The experts argue that the price of gold is going to continue climbing in value. This opinion surrounds the safe haven qualities of the precious metal. Today, we'll talk about what we've seen recently from investor demand, why experts believe that demand will continue to rise, and what I'm expecting to see from the price of gold moving forward.

Investment Demand Is Up

Recently, data released by the World Gold Council shows that the massive gains that we've seen in the price of gold throughout the year have been largely the result of investment demand. This demand is coming from primarily the United States, Europe, and Japan.

The World Gold Council recently said that in the first half of the year 2016, gold investment demand surged. During this period, investment demand for the precious metal came in at 1064.9 tonnes. This is a larger demand than we saw in the first half of the year 2009 following the global economic crisis. In fact, the 2016 first half gold investment demand beat the 2009 first half gold investment demand by about 16%!

Why Experts Believe That We Will Continue To See Gains In Investment Demand

When it comes to gold and what we're seeing in the price of the metal, the big term is safe haven. At the end of the day, investors look to the precious metal as a way to protect their assets in times of economic and financial instability around the world.

As we know, economic conditions around the world aren't looking great. Experts are pointing to this fact in their opinions of the precious metal. They say that a mix of low and negative interest rates, money printing at central banks, and further economic developments surrounding the Brexit are likely to continue to weigh heavy on the market. As a result, we're likely to continue to see investors adjusting their portfolios, increasing the demand for gold. In turn, this leads to an increased price. Recently, Prateek Pant, co-founder and head of products and solutions at Sanctum Wealth Management had the following to say...

Negative interest rates and surplus liquidity conditions will continue to prevail in the developed world for some time. Given these conditions, gold is a good asset class to stay invested in.

During the last rally, gold's price in the international market had gone past $1,900 per ounce. If investment demand remains strong, there could be more upside to the present prices... We have run numbers which suggest that investors should have a 10-15 per cent allocation to gold at all times. This level of allocation has the potential to reduce portfolio risk considerably without affecting returns.”

Where I Think Gold Price Is Headed

In general, my overall view of gold and where the price is headed moving forward remains overwhelmingly bullish. At the moment, safe-haven demand for the precious metal remains incredibly high. Given current global economic conditions and how central banks are choosing to deal with the issue, I'm expecting that investors will continue to increase the demand for the precious metal for the foreseeable future. As mentioned by Pant, the price of gold reached $1,900 + in the last bull run. This time around, I believe that the run is stronger - and demand shows it. As a result, I wouldn't be surprised to see the price surpass this mark over the next year or so. 

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Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.