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Refinitiv GFMS: Gold To Avg. $1,292 In 2019; Physical Demand To Limit Gains


Refinitiv GFMS looks for gold to average $1,292 an ounce in 2019, calling for increased investment demand but saying physical markets – such as jewelry – may be “subdued” due to high prices.

In addition to the outlook, analysts also provided an overview of the fourth quarter, reporting that investment demand and central-bank buying both picked up.

Spot gold was trading at $1,311.10 as of 8:41 a.m. EST. The metal has risen 13% since the August low.

“We expect gold prices to continue to benefit from continued economic uncertainty and a slowdown in the U.S. economy,” said GFMS analysts at Refinitiv. “As we approach the end of the economic-growth cycle, demand for defensive assets is likely to pick up as concerns deepen about the widening U.S. budget deficit and as the tariff-driven trade war starts to damage the country’s economy.”

The potential for rising inflation, an end to the cycle of rising interest rates and potential for a correction in the stock market are all factors that could boost interest in gold but hurt the U.S. dollar, analysts said.

“While ETF [exchange-traded-fund] and bar and coin demand is expected to see a return to growth, physical markets are likely to be subdued due to the higher price level,” analysts said in their report. “We therefore forecast gold to average $1,292/oz in 2019.”

Meanwhile, during the fourth quarter, investor interest perked up and speculators bought to cover short positions, or bearish bets, on Comex, the GFMS analysts reported. ETFs recorded inflows of 114 tonnes of gold, taking global ETF holdings to 2,321 tonnes, the highest level since June. However, retail investment in the form of coin and bar demand eased in the fourth quarter, with North American buying hurt by a strong U.S. dollar and optimism about the U.S. economy, analysts reported.

Official-sector purchases during the fourth quarter totaled 196 tonnes, the most so far this century, according to the GFMS report. This brought total estimated net purchases for the year to 571 tonnes.

“A shift in central-bank behavior, in which further EM [emerging-market] countries are seeking to build their gold reserves, has resulted in some countries reporting their first transaction in 2018 since the turn of the century,” GFMS said. “China, which has not reported a change in its gold holdings since October 2016, reported for the first time in December a 10-tonne increase in its holdings, with weakness in the Asian equity market driven by trade tensions with the U.S. a key influencer.”

However, jewelry consumption fell globally in the fourth quarter by 3% to 560 tonnes, according to the report. Demand in Asia, which accounts for more than 80% of total global jewelry fabrication and consumption, was down following an economic slowdown, analysts said.

GFMS reported that global mine output increased by 27.7 tonnes, or by 1.2% year-on-year, during the first nine months of 2018. Indonesian output surged 32.4%, helped by higher grades, while Australian production was up 8.3% and Canada’s climbed 9.6%. The largest decreases were posted in China, South Africa and the United States, with a combined fall of 56.7 tonnes. Average all-in sustaining costs increased 4.5% year-on-year to $924 an ounce.

The GFMS gold survey has been published since 1967.