At the end of 2016, Straftor, a global intelligence company, released a. What can we learn from this publication?
2017 will be an interesting year, for sure. First of all, it will be a crucial time for Europe, due to the elections in France and Germany – the very pillars of the European Union. According to the authors, the EU will eventually dissolve – and these elections may accelerate the process. The potential breakup will be supportive for gold prices, although gains may be limited due to the U.S. dollar’s appreciation.
When it comes to the U.S., we will see retrenchement, although it is easier said than done for a global superpower. The increased protectionism should be supportive for the yellow metal, although geopolitics is not the main long-term driver in the gold market. However, we will also see some macroeconomics shifts. Stratfor claims that inflation will return this year, which will lead to monetary tightening. A tightening in monetary policy in the United States and a strong U.S. dollar may shake the developing countries (which have dollar-denominated debts), but are fundamentally negative for the gold market, as we repeat all the time. On the other hand, markets are likely to be much more volatile in 2017 than in 2016, according to the report. The swings in asset prices may, of course, boost some safe-haven demand for gold.
To sum up, Stratfor released its annual forecast in December. It is definitely worth reading, although it does not refer directly to the gold market. However, the conclusions are clear. Geopolitical risks contribute to the upside, while the macroeconomic outlook adds to the downside. It suggests that the annual trend should be bearish in the gold market, but with many ups and downs related to geopolitical events. This prediction should hold, unless, of course, some important black swan arrives. Having said that, investors should not make decisions guided only by the anticipation of tail events – in 2016, we saw both Brexit and Trump’s victory, but markets proved to be extremely resilient and the yellow metal did not skyrocket, as many analysts believed.