Why Gold Is Now In A New Bull Market

Tuesday, 5 July 2016, 4:53 pm
Press Release: MyGold

Why Gold Is Now In A New Bull Market

Though many believe that the global interest in gold peaked five years ago, a new bull market appears to be on the rise. Most people understand that gold is valued for its impressive aesthetics. Yet gold is also used in a variety of medical and industrial applications. The number of reasons to invest in gold is seemingly endless. Today's prices are particularly attractive, prompting many industry insiders to declare that the future of gold will continue to shine bright. Keep reading to find out why gold is entering the beginning phases of a new bull market that could last for years or even decades.

Gold Prices Have Increased yet Mining Production has Leveled Off

The 2016 Gold Demands Trends report issued by the World Gold Council shows that the wold's mine supply amounted to 774 tonnes during the first three months of the year. This supply represents an 8 percent hike on a year-over-year basis. Yet this supply level is also 14 percent less than the peak that occurred toward the end of 2014 (897 tonnes). The world's mining leaders have shifted their focus to reducing costs rather than developing and exploring for new gold.

Take a look at PricewaterhouseCoopers latest surveys and you will find that gold mining executives still forecast a bear market for gold prices. This bearish outlook is manifested in the form of a decrease in the average long-term price in the context of planning purposes. On a year-over-year basis, this price has decreased from $1,284 to $1,231. Those who have a negative outlook on the precious metal are clearly unwilling to supply funding for development and exploration purposes. As a result, the supply of gold could be limited across posterity.

Readers will be interested to learn that the jump in gold production during the first quarter of 2016 was the result of increases by a handful of miners. Cortez increased production by 6.8 tonnes, Barrick's Goldstrike hiked production by 3.3 tonnes and Newmont's Batu Jijau generated an increase of 2.6 tonnes. Yet it is anticipated that such increases will be short-lived. It is expected that Barrick will continue to de-leverage and decrease its debt by a couple billion dollars this year. The group will likely lower its gold production from 6.12 million ounces in 2015 to 5 million ounces this year and and 4.6 million ounces in 2017-2018. The bottom line is that the mining of gold will likely decline in the next couple of years and prices will continue to increase.

Economists Anticipate an Uptick in Indian and Chinese Demand for Gold

The World Gold Council is on record as stating that investors in India and China cooled off on gold in the first quarter of 2016. Indian demand surprisingly dropped in this period of time due to a jewelers' strike. Demand in China decreased due to the recent upswing in gold prices, thereby lowering consumer demand for jewelry. Yet these downswings in demand probably won't last much longer. These recent events have created an excellent buying opportunity for gold investors.

What matters most in the context of Indian and Chinese demand for gold is worker income levels. The residents of both countries view gold jewelry as the type of luxury that one purchases as his income steadily increases. This is excellent news for gold investors as China's real wages have steadily risen by more than 10 percent year-over-year. The wages earned by Indians have also increased at a similar pace. This is precisely why so many economists anticipate an ever-increasing demand for gold throughout India and China across the next couple of years. The bullish outlook for gold was echoed in a piece recently published by Forbes, in which it was mentioned that the best time to buy the precious metal is right now.

Fiscal and Monetary Policy and the Surging Demand for Gold

Consider the fact that more than one-third of global sovereign debt generates negative interest rates. Plenty of investors and currency traders are moving to gold as a safe haven of sorts. Investing in gold preserves capital in a way that other investments can't. This year's first quarter gold investment demand reached a level that has not been attained since 2009. All in all, the global gold investment demand of this year's first quarter is the second-highest of any in recorded history. Even European investment in gold has remained robust amidst negative interest rates and Britain's exit from the European Union.

Some reports indicate that there has been a jump in the physical demand for gold in Europe. As an example, plenty of Germans have purchased safety deposit boxes to safeguard their growing supply of gold. These individuals are stockpiling the precious metal as a means of hedging against future interest rate drops. Add in the fact that Japan might roll out a $100 billion (US dollars) fiscal stimulus policy later this year in the form of limited-time coupon vouchers and it is easy to see why so many anticipate an uptick in the demand for gold. Furthermore, the global investment community widely agrees that the Fed will avoid a rate hike later this year and/or in 2017. Such low U.S. rates will also bode well for gold across the next couple of years.

www.mygold.co.nz

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