by Peter Schiff, Schiff Gold:
When looking at the gold market, it’s easy to get caught up in the daily price fluctuations or the most recent headlines on the financial channels and forget about long-term market dynamics. Gold, after all, is generally more of a long-term investment that has historically served as a hedge against economic turmoil and protected investors against fiat currency devaluation – otherwise known as inflation.
The World Gold Council recently released its Gold 2048 report providing in-depth analysis of how the gold market will potentially evolve over the next 30 years. In general, things look pretty bullish for the yellow metal if you consider a longer view.
The WGC has identified four long-term trends it thinks will impact the gold market in the coming years.
First, WGC analysts expect an expanding middle class in emerging markets to drive gold demand higher. This is especially true in India and China, the world’s top consumers of gold. China’s income growth is expected to come in at around 6.4% in 2018. And India’s economy is expected to be one of the fastest-growing in the world next year, expanding at an even faster rate than it did between 2012-2014. In fact, according to the 2018 World Economic League Table, India will leapfrog France and England in 2018 to become the world’s fifth largest economy in dollar terms. Consumers in both China and India buy a lot of gold, so this bodes well for the broader market for the yellow metal.
Second, the expanding using of gold in technology will further drive demand for the yellow metal. The WGC says, “Gold’s position as a material of choice is expected to continue and evolve over the coming decades.” The tech sector has an increasing appetite for gold. Demand in the technology sector was particularly strong in the first quarter of this year, marking its sixth consecutive quarterly gain. Overall, demand for gold in technology and industry increased 4% to 82 tons year-on-year. Gold is used in electronics as well as healthcare applications.
Third, the WGC predicts mobile apps for gold investment, which allow individuals to buy, sell, invest and gift gold, will develop rapidly in India and China. Along with growing incomes, this will help increase demand for gold. Digital technology is also now allowing people to make everyday transactions in gold using a debit card. GoldMoney already provides these services and the market will likely grow.
Fourth, the WGC says the gold mining industry will have to grapple with the challenge of producing similar levels of gold over the next 30 years to match the volume it has historically delivered. We have reported extensively on the possibility we have reached “peak gold.” Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s. Whether we’ve reached that point or not, it seems clear the world will face declining or stagnant production over the next several years.