By Mike Fuljenz
On Thursday, January 10, 2019, the U.S. investment bank Goldman Sachs raised its gold forecasts to $1,425 over the next 12 months. It sees $1,325 within three months, $1,375 within six months, and $1,425 within 12 months. Those forecasts are up $75 per ounce from its previous forecasts of $1,250, $1,300, and $1,350 per troy ounce for the same time spans, respectively. Based on a beginning price of $1,279 in 2019, an increase to $1,425 represents an increase of more than 11% for the coming year.
In explaining its move, Goldman analyst Jeffrey Currie said, “Going forward, gold will be supported primarily by growing demand for defensive assets. The same is also true of central bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market.”
Demand and Impacts
It also cited the double threat of a weaker economic outlook on top of the Fed’s uncertain statements about whether or not it will raise rates further in 2019. Currie said that gold will begin to price much more off fear of the next recession than off the opportunity cost of holding gold, as most other investments have fallen.
Interestingly, in February, gold leaped over $1,300 as the U.S. Dollar Index, as measured against a basket of six leading foreign currencies, lost value. In 2019, gold and silver are each up about 3%, but silver is up substantially more, +12%, than gold, +8%, since November 30. Coin dealers have also noted increased sales and prices for bullion and many bullion-related numismatic gold coins.
While U.S. investors may be frustrated by gold’s narrow trading channel in recent months, investors in dozens of foreign nations are very pleased that gold has not only kept its purchasing power, but has far exceeded their home currency in value over the long term. In late 2018 and early 2019, gold has reached or is about to reach an all-time high price as measured in 72 global currencies.
Countries Report Record High Gold Rate
Among those currencies with gold at or near a record high are the Argentine peso, Australian dollar, Brazilian real, Canadian dollar, Chilean peso, Indian Rupee, Iranian rial, Japanese yen, Mexican peso, Norwegian krone, Russian ruble, South African rand, Swedish krona, and Turkish lira.
Even in U.S. dollar terms, gold has averaged 8% annual gains since the year 2000, a rate of increase which far exceeds inflation, interest rates, or any major stock market index. Over the last 19 years, gold is up 343% vs. only 79% for the S&P 500 or 112% for the Dow Jones Industrial Index. Stocks and gold will go up or down vs. each other in any given year, but history shows that it pays to own gold in a well-balanced portfolio. Many experts recommend between a 10% and 25% position in precious metals.
About the Columnist: Mike Fuljenz, president of Universal Coin & Bullion in Beaumont, Texas, is a leading coin expert and market analyst whose insightful writing and consumer advocacy have earned major honors from the ANA, PNG, NLG, and the Press Club of Southeast Texas. His website is www.universalcoin.com.