Commodity Markets

Populism Is Dominant Gold Fundamental

If political uncertainty across America and Europe shaped gold demand in 2016, then the year ahead could be a banner one for the precious metal. Investors bolstered their exposure to gold last year, primarily through exchange-traded funds. Gold-backed ETF demand was the highest since 2009, despite weakness in the fourth quarter. Year-end profit taking occurred in tandem with the so-called Trump rally as investors allocated away from their gold-backed positions. But the unsettled ground on which the new Washington elite finds itself, as well as bewilderment over European leadership, suggests sustained, if not vibrant, demand for the precious metal. One highlight of gold-market analysis is the split between jewelry weakness and ETF strength. Traditionally, jewelry purchases in China and India drive the gold price; financial instruments now upend that convention.

Our Vantage Point: The French election may be the next milestone for the gold price. Presidential candidate Marine Le Pen has called the April vote a “choice of civilization.”

Learn more at the World Gold Council

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