Gold’s price rally has been a product of demand-side economics, and there is still a considerable amount of interest in gold that is not fully tapped, according to Tom Brady, chief economist at Newmont Mining.
“The trend that we’ve seen over the last couple of years has continued, this was very much an investor-driven market since 2016,” Brady told Kitco News on the sidelines of the Mines & Money New York conference.
Gold prices rose from $1,050 an ounce in 2016 to $1,314.20 as of Tuesday’s close, and according to Newmont economist, a large part of that rally is due to investor interest in the precious metal, rather than physical demand.
“It has been an investor-driven story, physical demand, the demand for jewelry, bars, and coins, are relatively muted,” he said.
Gold has been range-bound for most of the year, and according to Bloomberg Intelligence, has seen the tightest range since 2005.
Brady noted that in order for gold to break out, traders will need to see heightened economic uncertainty and geopolitical risks.
“We’re just at a heightened level of economic uncertainty in the U.S. and abroad, and that is really continuing investors’ interest in safe havens and gold,” he said.
Brady’s comments come as U.S. president Donald Trump announced a withdrawal from the Iran Nuclear Accord on Tuesday, stating that financial sanctions will be reinstated on the Islamic Republic.
Markets fell sharply immediately after Trump’s announcement, but rebounded by market close, ending the session relatively unchanged from the previous day’s close.
The S&P 500 is maintaining its hold above 2,600, continuing the second longest bull market in its history. Brady said that heightened volatility should be expected this year, more so than last, which is bullish for gold.
“Year-to date [has been] very much a sideways trend. Lots of heightened sense of volatility in the markets, and that’s all driving investors towards safe havens,” he said.
Reference: Kitco
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