Why the Gold Rally Could Continue in the Long Term
The Future of Gold Prices: Trends and Insights
Currently, the price of 999/1000 gold with August delivery at the New York Comex is $2,300 per ounce.
To understand whether this price trend will continue or reverse, it’s essential to delve into the market structure, demand and supply characteristics, and long-term dynamics.
The Role of the World Gold Council
The World Gold Council (WGC), founded 37 years ago and headquartered in London, serves as the industrial association of the leading global gold mining companies.
It provides valuable insights for gold investors and industrial users.
WGC continuously produces research, sector studies, and industrial outlooks on gold, benefiting industries, consumers, and the global jewelry market.
While gold is primarily used for jewelry production, it also plays a vital role in various industries such as electronics, space vehicles, and aircraft engines.
However, the mining industry is facing challenges in maintaining production growth due to the scarcity of new gold deposits.
Challenges in Gold Mining Industry
According to WGC Chief Market Strategist John Reade, despite a record production increase in the first quarter of 2024, the mining industry is struggling to sustain growth.
In the long term, gold production levels are expected to stabilize around those of 2016 or 2018 due to the difficulty in finding new viable deposits.
Historical data shows that the global gold production growth has been diminishing, with challenges arising from higher extraction costs, limited reserves, and administrative hurdles in obtaining mining permits.
The exploration phase alone can take 10 to 20 years before a mine becomes operational.
Supply Constraints and Future Outlook
With diminishing production rates and increasing extraction costs, the future of gold mining faces significant challenges.
The sector’s operational complexity, bureaucratic delays in obtaining permits, and the need for infrastructure development in remote mining areas contribute to the industry’s struggles.
Despite short-term technical factors influencing recent gold price rallies, long-term supply constraints are expected to drive prices higher in the coming years.
Considering the growing demand for industrial and jewelry purposes, a chronic supply-demand gap could lead to sustained price increases over the next 5 to 10 years.
Investment Opportunities and Considerations
Gold remains an attractive investment option for prudent investors with a long-term outlook.
Allocating a portion of your portfolio to gold investments can provide stability and diversification.
Two ETCs listed on the Italian stock exchange, Invesco Physical Gold A and iShares Physical Gold ETC, present viable investment opportunities for those considering gold as a long-term asset.
DISCLAIMER: The information provided in this article serves as informative guidance and should not be the sole basis for investment decisions.
Readers are encouraged to make investment choices based on their risk tolerance and financial goals, acknowledging the content’s informational nature.
