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Thompson Reuters GFMS Outlook: Gold Above $1,400 in 2018

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Analysts at Thomson Reuters expect the price of gold to push back over $1,300 and then continue to rise above $1,400 through next year, primarily driven by overvalued stock markets, according to the GFMS Gold Survey 2017 Q3 Update and Outlook.

Gold briefly broke through the key $1,300 level in late August. Safe-haven buying served as a key driver, as heated rhetoric between the US and North Korea was at a peak late last summer. But gold fell back below $1,300 and has traded within a tight range over the last few weeks as investors mull future Federal Reserve moves and the impact of GOP tax reform – if Congress can get it done. Lackluster investment demand in the West, particularly North America, has also led to a supply surplus.

Thompson Reuters analysts say the initial push above $1,300 was an overextension of the price at the time, and they call the drop back below that level “a healthy correction for the price that has formed a base for a more sustainable move above $1,300 later this year.”

The report calls for gold to rise still further in 2018 as it averages $1,360 and hits a 2018 peak near $1,450.

The GFMS report primarily bases its optimistic outlook for gold on overvalued stock markets. As we have reported, even the mainstream has acknowledged that asset markets are bloated. In fact, Bank of America called it “irrational exuberance.” The latest fund-manager survey by the bank found that a record 48% of investors say the US stock market is overvalued.

Thompson Reuters said the growing risk inherent in key global equity markets is crucial to gold’s bullish future.

Even if this doesn’t lead to a marked correction, we believe the growing risk will spur some investors to make (or increase) their allocation in gold rather than being caught too heavily in an equity fuelled basket.”

In other words, even if the bubble doesn’t burst, leading to a precipitous crash, analysts and Thompson Reuters expect investors to begin to diversify and buy gold as they hedge against the inevitable downturn.

The report also mentions continued geopolitical tension as a factor pushing gold higher in the coming months, not only the ongoing conflict between North Korea and the United States, but also Brexit negotiations, Catalunya secession efforts, and upcoming Italian elections.

The report didn’t reveal any surprises in its supply and demand analysis for Q3. Physical demand was up 7% year-on-year at 900 tons, but that still marked the lowest level for a quarter this year. You can read more detailed analysis about gold demand HERE.

Thompson Reuters supply numbers mirrored those released by the World Gold Council, showing a 2% declined in total supply.

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