James Rickards: Runway For Gold Opens Up On Anticipated Tailwinds

A New Year is upon us and gold is shining bright. The precious metal is holding onto recent gains after closing out 2018 near a six-month high. Spot gold managed to post its best monthly gain in almost two years in December and outperformed the broader market. Volatility in global equity markets, the outlook for the Federal Reserve and a weakening dollar, pushed gold out of the doldrums for the year.

Gold may have posted its first annual pullback since 2015, but recorded a gain of 7.2% in Q3 2018 and an advance of 4.6% in December. In fact, the precious metal had its best December performance in a decade. Considering that gold hit a 20-month low in August of last year, the pace of recovery is worth noting. Also daily trading volume for the metal was high in terms of OTC transactions rising by 2% YOY.

2019 kicked off with concerns about the slowing global economic growth and the trajectory of the Federal Reserve’s monetary policy. Ongoing uncertainty over U.S.-China trade negotiations, the partial U.S. government shutdown and Brexit, boosted demand for safe havens.

Ahead of the positive U.S. Employment Report for December, gold futures managed to top the $1,300 an ounce mark. Prices retreated below the psychological level in the aftermath of a robust jobs report as Fed Reserve Chairman Jerome Powell emphasized the central bank’s sensitivity to downside risks and expressed his confidence in the U.S. economy. While risk appetite rose amid the rhetorical shift, it may be too soon to breathe a sigh of relief.


Jim Rickards joined me at the NASDAQ MarketSite at the end of last year to talk about the outlook for 2019. He expects the headwinds for gold will turn into tailwinds and that the outlook for prices remains positive. Given the slow and gradual recovery for spot gold, Rickards mentioned that he gets asked often about the leisurely pace of the advance.

The fundamentals that are monitored closely in correlation to gold include USD price action, the interest rate outlook and inflation. The Federal Reserve may be nearing the end of its three-year rate hiking cycle sooner rather than later. With potential upside for gold prices, be on the lookout for a possible breakout amid volatile trading conditions.


As the first full trading week of 2019 got underway data from the People’s Bank of China showed that the nation increased its gold reserves last month for first time since October 2016. While this is a notable move, other countries around the globe added to their gold holdings for the first time in several years. Hungary and Poland added to their gold holdings following similar diversification and repatriation moves by other central banks.

It is no secret that gold is viewed as a safe haven asset that provides protection from USD fluctuations so it should come as no surprise that central bank reserve holdings of gold climbed last year. The official numbers on central bank net purchases of gold showed that the net buying of reserves pushed overall sector activity higher.

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