Bullion investors, miners and makers of coins will help drive the fifth straight annual increase in total global gold investment in 2018, CPM Group said in its Gold Yearbook 2018 on Tuesday, citing geopolitical tensions and fears that the bubbling U.S. economic expansion will end in a 2019 recession.
"The changing global monetary policy landscape coupled with long in the tooth growth cycle in the United States, and little fresh ammunition to bolster the U.S. markets further, means that the U.S. economy looks most at risk of recession," CPM said.
CPM forecast net gold investment at 20.3 million ounces during 2018, a 6.6 percent rise from its 19.1 million ounces in 2017, and the highest increase since 2016 when it rose 23.9 percent to 26.1 million ounces.
The independent commodities research company said gold coin demand for bullion produced by private mints would be at 6 million ounces in 2018, up from 5.7 million ounces in 2017 and the highest since 2016.
"Market volatility has been unusual, worried more investors and brought more attention to gold as a haven," said George Gero, managing director of RBC Wealth Management. "Asset allocators have been looking for assets that could be a hedge with forthcoming inflation."
Total gold supply will rise slightly to 127.4 million ounces in 2018 from 127 million ounces last year.
Global mine supply will increase marginally to 97.2 million ounces this year from 97 million ounces in 2017, and is expected to weigh on investment demand for bullion as a commodity.
Total fabrication demand is forecast at 97 million ounces, the same as last year.
Gold prices rose 14 percent in 2017 from the end of 2016. Though record-reaching equities and cryptocurrencies likely distracted investors from gold last year, CPM said gold prices got a boost from heightened tensions between the United States and North Korea, failed attempts in the U.S. Congress to overthrow the Affordable Care Act and issues with Syria, Iran and Catalonia.
Moreover, the face of the gold investor had changed during 2017, CPM said. As a result coin sales fell to 5.7 million ounces in 2017, the lowest since 2012.
"More gold has been bought out of greed than fear in the past year and a half or so. As a result, gold coin sales fell, while gold ETF investments, and futures and options trading have risen since 2015," CPM said.