Gold shone in 2019
Gold had its best performance since 2010, rising by 18.4% in US dollar terms last year. It also outperformed major global bond and emerging market stock benchmarks in the same period (Chart 1). In addition, gold prices reached record highs in most major currencies except the US dollar and Swiss franc .
Gold prices rose most between early June and early September as uncertainty increased and interest rates fell. But investors’ appetite for gold was apparent throughout the year, as seen by strong flows into gold-backed ETFs, growing gold reserves from central banks, and an increase in COMEX net longs positioning.
High risks and low rates on the horizon
We expect that many of the global dynamics seeded over the past few years will remain generally supportive for gold in 2020.
In particular, we believe that:
- Financial and geopolitical uncertainty combined with low interest rates will likely bolster gold investment demand
- Net gold purchases by central banks will likely remain robust even if they are lower than the record highs seen in recent quarters
- Momentum and speculative positioning may keep gold price volatility elevated
- And while gold price volatility and expectations of weaker economic growth may result in softer consumer demand near term, structural economic reforms in India and China will support demand in the long term.