The World Gold Council recently released its forward-looking report on the global gold market—“Outlook 2018: Global Economic Trends and Their Impact on Gold.” In the report, the World Gold Council forecasts that four key factors will provide support for gold prices in 2018. Investors may continue to benefit from investing in gold.

　　The report指出, in 2017, gold priced in U.S. dollars rose by 13.5%, marking the largest annual increase in gold prices since 2010 and outperforming all major asset classes except stocks.

　　Regarding the 2018 gold price trend, the report believes that four key market trends will influence gold prices:

　　First, the synchronized global economic growth has a significant impact on gold’s consumer demand. As incomes rise, so does the demand for gold jewelry and technology devices containing gold. At the same time, rising incomes also boost savings levels, thereby boosting demand for gold bars and gold coins. Moreover, stronger consumer demand will in turn support investment demand for gold. Investors typically place great value on gold’s effectiveness as a financial hedging tool. The continuously growing wealth supports gold’s consumer demand, which in turn provides long-term support for gold prices. The interaction between investment and consumption also contributes to lower correlation between gold and other mainstream financial assets, making gold an effective tool for diversifying investments.

　　Second, we’re seeing a balance sheet that’s continually shrinking and interest rates that are steadily rising. The ongoing global economic expansion could prompt a tightening of monetary policy, with the Federal Reserve taking the lead in this regard. Although higher interest rates increase the cost of investing in gold, from a historical perspective, overall interest-rate levels are likely to remain low, meaning the potential headwinds facing gold may not be as significant. Moreover, gold can help investors manage risks in financial markets.

　　Third, asset prices are bubbly. In 2017, global asset prices reached multi-year highs. The U.S. S&P 500 index hit its all-time peak, and its cyclically adjusted price-to-earnings ratio reached its highest level since the peak of the dot-com bubble in 2000. This bull market in assets could persist throughout 2018. Analysts and commentators have been sounding warnings for some time now, yet the stock market has continued to climb steadily, and credit standards have kept easing. Should global financial markets experience a correction, investors could benefit from investing in gold, as gold has historically helped mitigate losses during periods of financial distress.

　　Fourth, the gold market is becoming more transparent and efficient. Investment instruments backed by gold around the world are making gold investment easier and less costly.

The World Gold Council believes that the combined impact of the aforementioned key trends could provide support for gold. In the long term, four additional characteristics make gold an attractive strategic investment: First, gold has consistently been a source of returns in investors’ portfolios; second, throughout both economic expansions and recessions, gold has maintained a very low correlation with major asset classes; third, gold is a mainstream asset with liquidity comparable to that of other financial securities; and fourth, historically, gold has been able to enhance risk-adjusted portfolio returns.

　　In fact, since the beginning of last year, the gold market has already posted a gain of over 15%. Regarding this year’s gold price trend, the market holds several relatively optimistic expectations, particularly the view that the gold market has already bottomed out.

　　Christopher Aaron, an analyst at iGold Advisor, believes that the gold market will enter a new upward trend this year. He pointed out that there are signs that the downward trend in gold prices since 2011 has come to an end. Therefore, gold prices are expected to rise in the future.

　　From 2011 to the end of 2015, the gold market was in a sustained downward trend. However, last August, this downward trend line was broken. Moreover, previously, gold prices had been oscillating and trending lower at their peak—but this pattern has now also been broken.

　　Aaron pointed out that the above-mentioned factors are all signals of a price increase. Although many people believe that the appearance of these signals doesn't necessarily guarantee a rise, what will actually happen? We can look at the performance of the gold market from 2008 to 2011 for insight.

　　In 2008, gold prices reached a peak of $1,033 per ounce, after which prices began to decline until the downward trend was broken in February 2009. However, in March and April 2009, the gold market once again experienced a downturn, falling as low as $865 per ounce by April of that year.

　　Aaron pointed out that at the time, many investors believed that after gold prices broke through the downward trend, they failed to continue rising and instead fell—a sign that the rally in gold prices had come to an end.

　　However, looking at a longer time frame, gold prices subsequently entered a sustained upward trend, reaching an all-time high in 2011.

　　Aaron believes that it’s clear from this that, in addition to paying attention to price fluctuations, the most important thing is to focus on changes in trends.

　　At the beginning of 2009, the gold market embarked on a new rally. However, during that period, it experienced a 13.5% drop. Judging by today’s prices, this translates to a decline of roughly $171. If such a drop were to occur today, it would likely trigger market panic.

　　Currently, the gold market has broken through a longer-term and more significant trendline. From early September last year, when gold prices rose to nearly $1,360 per ounce, to early December last year, when they briefly fell below $1,240 per ounce, the gold market has experienced a substantial decline.

　　Aaron believes this situation is very similar to that in April 2009—except this time the decline is only 9.5%, not as severe as last time. However, this suggests that the gold market could soon see a significant upward surge.