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Global gold demand increased 2 percent during 2016 to 4,309 tons, according to recent research from the World Gold Council. This figure represents a four-year high. Analysts at the firm tied the jump to various economic and sociopolitcal developments, including the decline of Chinese markets, the U.K.'s exit from the European Union and the American presidential election. These incidents alone bolstered demand by 70 percent, as investors sought safety in commodities in the face of overwhelming uncertainty.
"[This past year] saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold," Alistair Hewitt, head of market intelligence for the WGC, explained in a news release. "Retail investors – having been subdued for most of the year – responded quickly to the price fall in Q4, a fact reflected by a surge in demand in the physical market."
Annual outlook positive
Hewitt and his colleagues expect this trend to continue throughout the year, as political turbulence continues breed uncertainty here and abroad. In fact, precious metals analysts have seen gold demand rise through the first two months of 2017, as investors contend with polarizing policy enacted by the Trump administration, CNBC reported. The recent immigration action has some believing long-term uncertainty may set in.
"We acknowledge the upside risks related to recent actions taken by President Trump, such as the immigration ban. Should he become the feared 'unguided missile', uncertainties would increase, fostering safe-haven demand and pushing gold prices significantly higher," experts from the Swiss bank Julius Baer wrote in a note to investors obtained by the news organization.
Even so, a number other variables have the potential to disrupt the resurgence of gold and other commodities. For example, precious metals purchasers in India have backed off in response to recent legislation designed to bring to light black money, Reuters reported. Consumption rates are hovering between 650 and 750 tons per year. Normally, the country consumes around 845 tons annually. Unfortunately, analysts close to the situation say there may be no resolution, as a number of extenuating factors are exacerbating problems related to the new anti-corruption policies.
Back in the states, questions remain concerning how the Trump administration may impact the economy. If the president successfully implements the growth-focused proposals he pitched during his campaign, further improvements may materialize and drive down gold.
Ultimately, these factors will determine if the yellow precious metal can best its 2016 marks over the next 11 months.