How will demand for gold investments change in the long run?

News Arnulf Hinkel, Financial journalist – 27.06.2018

Demand forecasts that go beyond a very limited period of time are always difficult. Just look at the demand for gold investments over the last 30 years: who would have predicted the surge in demand due to a revolutionizing of the very idea of gold investments through the creation of physically hedged gold ETFs and ETCs that can be traded on-exchange, cost-efficiently and transparently? Who would have expected the widespread popularity of gold as part of an investment portfolio to collapse as it did in the 1990s and early 2000s? John Reade, Head of Research and Chief Market Strategist of the World Gold Council, has taken a look into the possible future of gold investments and published his findings as part of the study "Gold 2048: The next 30 years for gold".

Return to NICE times unlikely

The main reason for the decline in investor interest in gold-based products in the 1990s was a NICE market constellation. NICE stands for "non-inflationary constant expansion". John Reade is convinced that a long-term return to this market constellation is not very likely in the foreseeable future. There are too many factors speaking against it: the elevated valuations of various asset markets, the large debt levels in many economies and the yet unresolved structural problems that led to the global financial crisis in 2008. Anticipation of and reactions to further financial crises and times of uncertainty, on the other hand, will support demand for gold in the long term.

Economic shifts of power on a global scale

It is very likely that the US will have to hand over its leading economic role to China in the medium term, and the People's Republic itself will have to face India as a hot competitor in the battle for global economic leadership in the long run. These developments, however, could also further fuel fears of financial crises. At the same time, the increasing prosperity of the populations of both China and India will continue to support or even increase demand for gold.

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