The Asia Miner

JUL-SEP 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 15 • issue 3 9 FEATURE: All that glitters is gold PRICE AND MARKET OUTLOOK Most analysts agree that poliঞcal uncertainty, increased interest rates and the state of the US dollar will conঞnue to be key drivers for the gold price in 2018. According to analysts at FocusEconomics, "[f]ears of a potenঞal trade war followed US President Donald Trump's decision to place import tariffs on steel and aluminum, supporঞng demand for gold, as it both increased the precious metal's appeal as a hedge against uncertainty compared to US bonds and equiঞes, and put downward pressure on the US dollar." According to the Invesঞng News Network (INN), other poliঞcal concerns stem from frequent changes within the Trump administraঞon. For example, the departures of two key officials, former Secretary of State Rex Tillerson and top economic advisor Gary Cohn, "le[ investors worried". This poliঞcal shakeup "resulted in a weakened dollar, which made bullion cheaper for holders of other currencies". Some analysts predict that gold will have a bullish remainder of 2018. John Kaiser of Kaiser Research, as quoted by INN, believes that gold could trade between US$1,600 and US$2,000 this year. "There's a growing demand for gold that could push up the real price as opposed to inflaঞon or the US dollar declining," Kaiser said. "A real price increase is criঞcal. A move into the US$1,600 to US$2,000 range is very plausible without it being inflaঞon driven. I think this is going to happen this year." General consensus of most market watchers, however, finds a balance somewhere between US$1,300 and US$1,500. GFMS believes that "the geopoliঞcal climate and equity markets will conঞnue to support gold's role as a risk hedge. Uncertainty revolving around President Trump's poliঞcs, along with ongoing tensions in the Middle East and Brexit negoঞaঞons will remain gold's key drivers". Against this seমng, GFMS anঞcipates that ETF demand will rebound this year to 350 tonnes, and following four consecuঞve years of declines, retail investment will rise also in 2018. Addiঞonally, GFMS expects China to resume as a central bank buyer and consequently the "official sector globally will acquire over 400 tonnes on a net basis". However, coin demand is forecasted to slide further due to the sector's appeal to price sensiঞve investors who are likely to be discouraged by higher gold prices. Increasing gold prices will also spell a decrease in jewellery o\ake as already seen in the first quarter of 2018. Although global gold jewellery demand was stable in Q1 at 487.7t, just 3.9t below Q1 2017, the market remains weak. GFMS anঞcipates that jewellery o\ake in 2018 will fall by 3 per cent. On the upside, supported by a more stable producঞon from China and a rising Russian output, mine producঞon is expected to rise in 2018. Gold price in USD from Q1 to start of Q3. Source: Kitco supported by a more stable production from China and a rising Russian output, mine production is expected to rise in 2018

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