The world Gold Council commissions studies on the gold market. It takes into account the economical, demographic, political and social trends and the impact on the gold market and in their report Gold 2048: The Next thirty-years for gold. It identified macro and micro trends that will have implication on gold in the next coming years.
The WGC made the following observations:
The growth of the Middle class
According to the WGC report, the biggest driver for the price of gold in emerging markets like China is the growing number of middle class citizens with more disposable incomes. India, which as been the world’s biggest consumer of gold is expected to be the quickest growing market especially if it succeeds in pulling off its political and economic reforms. The middle class in India is expected to grow from 19% to 73%. This not only means that India will be buying more gold but also that it will have a bigger purchasing power in the world. Gold dealers in this regard are becoming more important than ever in India for the buying and selling of Indian jewellery.
China is also expected to see a rapid growth in its middle class. However, unlike India China might face more demographic headwinds. These will include its aging population which will affect the economic growth even as the middle class keeps growing.
Mined gold is become less every year which means that the gold mined might not be enough to satisfy the demand for gold.
Supply and demand dynamics
Most of the gold mined is used in making jewellery and investments grade bullion in the form of coins or bars. Gold has other applications like industrial, health care, dentistry and space technology. Gold is popular because of its corrosion resistance and high conductivity. Some technological trends that will push the demand for gold include:
The field of IOT has been growing and is expected to lead the evolution of electronics used in consumer goods.
Shifting from petrol fuel to electricity in the automobile industry might require the extensive use of gold. Electric and hybrid cars require high-end technology that uses a lot of gold and as time moves on and more people switch to electric cars.
Gold is continuously being used in the medical field. There is a whole range of gold compounds being researched for medical applications and some that are already being used in the treatment of certain medical conditions like arthritis.
The solar panel industry which uses gold as a component is also booming which adds to the growing demand for gold.
The demand for gold as an investment vehicle is also getting bigger as more people become aware of the benefits of having gold as a hedge in times of turmoil.
With all that said, the demand might be growing but the supply is dwindling because of low gold discoveries rising costs of mining and the unstable prices of gold. The cost of mining has increased by 10% over the last decade and it has impacted the price of gold. People who bought gold a decade or two ago are seeing incredible returns on the investment. As supply from mining continues to dwindle, the price of gold continues to rise and more gold dealers are seeing a rise in the number of people cashing in on their investment.
An uncertain Future
In the next 30 years, the investment landscape is expected to change radically. The global economy is changing. The number of working age populations is shrinking. Wages aren’t rising and the low inflation era is expected to end. As artificial technology improves. It will displace a lot of workers, affect employment numbers and elevate social and political tensions were are already experiencing thus making the markets more volatile. The dynamics of global economic powers are also shifting. The bottom line is that we might see financial and political uncertainty rising. We are already in the throes of Brexit and a trade war between the U.S and China, two superpowers that have a profound impact on the gold market. Countries and their central banks seem to be bracing themselves by increasing their gold reserves which should tell the ordinary investor that tough times are up ahead.
We have been in crisis before and gold has prevailed as a store of value when currencies failed. It’s value has never reached zero and because it is not linked to the stock market, gold has come out of several recessions smelling like roses. Gold has been good especially for the buy-and-hold investors but the best thins about the yellow metal is that the entry points don’t have to be high. You don’t need to own gold bullion worth thousands. Like that of India you own gold jewellery which you can also wear. Having gold jewellery in your home is ultimately better than hording paper money under your mattress. Having gold. Any kind of gold means that you can get cash for your gold whenever you need it.