As the old adage goes, death and taxes are the only certainties in life. Well, in 2016 we can safely add volatility to that list. This year has seen unpredictable worldwide affairs rock the landscape of financial markets. Be it the shock of Brexit, the U.S. election race between two tarnished spearheads, or the sporadic unspeakable acts of violence in Europe and other continents to name a few contributing events, financial markets have been swinging to and fro around the globe. When considering these factors, compounded by broadly depressed interest rates and stagnant growth, it cannot be argued that gold has once again been the safe haven for investors from all four corners.
No matter the broad economic, political or societal environments, investors must still seek returns. It is well known among finance professionals that gold is a relatively sure bet during times of uncertainty and 2016 has been a testament to this notion. From a price of around US$1,075/oz in early January this year, gold has skyrocketed to roughly US$1,350/oz at time of writing. As you might expect, a number of foreign and ASX-listed gold miners have had a very strong year. Concentrated outperformance such as this brings with it much attention, as analysts and investors alike speculate regarding whether to take profits, invest more, or continue riding the wave.
The question remains what the rest of 2016 and beyond holds for gold and its beneficiaries. It seems difficult to ignore such vast uncertainty in global financial markets at this time, and while that alone may continue to prop up the gold price, a consensus forecast is indeed yet to be found. Some professionals are screaming buy, while important economic indicators may be suggesting the outstanding performance is coming to an end. Should investors regain confidence and shift portfolio allocations to reflect an increased risk appetite, the golden run may well come to a grinding halt. No matter what the future holds however, it looks like the Olympic Committee might be having a more subdued Christmas party after handing out those glorious medals this time around.
Jake Friend