Gold will be “Fear Asset” In 2017 After the metal’s best first half bullion has been losing its luster as global especially U.S. equities rallied to records despite that Gold is on the way for 9 percent plus return for 2016. What type of fear triggers gold to rise? Fear of inflation or that paper assets will return to their intrinsic value (i.e. zero) Fear that governments like P.I.I.G.S and even the U.S. will not be able to pay their debts. Fear that the EU will disband Fear of stock market collapse or instability. Fear that the housing market will collapse. Fear of War or Terrorism Fear of Banking Collapse or Corporate Bankruptcy Fear of almost anything Yes, there is plenty of fear in the market these days to fuel the price of gold. After the metal’s best first half bullion has been losing its luster as global especially U.S. equities rallied to records despite that Gold is on the way for 9 percent plus return for 2016. What type of fear triggers gold to rise? Fear of inflation or that paper assets will return to their intrinsic value (i.e. zero) Fear that governments like P.I.I.G.S and even the U.S. will not be able to pay their debts. Fear that the EU will disband Fear of stock market collapse or instability. Fear that the housing market will collapse. Fear of War or Terrorism Fear of Banking Collapse or Corporate Bankruptcy Fear of almost anything Yes, there is plenty of fear in the market these days to fuel the price of gold. In addition to Fear... China demand may be driving up the price of Gold.

A History of Holding Its Value A significant reason why people invest in gold is that it has performed admirably in holding its value over the long-term in comparison to other assets like paper currency, some coins or even stocks, which can lose their entire value if the company goes bust.

Inflation Gold is considered an ideal hedge against inflation — a reliable measure of protection against purchasing power risk. As a hedge against inflation, gold has ascended to great highs over the past decade, due to liberal central bank policies, such as the Federal Reserve’s recent quantitative easing programs. Gold in India—A Different Story Gold acts as a great hedge against inflation and has continued to do well in currencies where the central bank is running a policy of negative real rates and making financial savings unattractive, e.g. in India.

Geopolitical Uncertainty Gold typically rises when a crisis is of sufficient depth and breadth to trigger a system-wide failure. The proxy war in the Middle East between Saudi Arabia and Iran; The collapse of the European Union……   The bottom line is that political chaos equates to more interest in gold as a safe haven.

Increasing Demand Latest development is Islamic finance standards spur development of gold, silver products. Muslim investors will quickly embrace gold investment products such as coins, bars and include gold savings plans, gold certificates, and certainly Gold futures in their financial goals. Central Bank demand could accelerate on Growing Federal Debt Allow for Mutual funds in India to invest in commodities Over the long term, gold supply is expected to decline against the sustained investment demand from ETFs and Central Banks, along with a small rebound in gold jewelry demand. Gold had been seen as portfolio diversification

Outlook for 2017 heading towards 30500 mark The gold price should underperform in Q1-Q2 2017 can see prices once again near to 25000 per 10 gms level next year. We believe that the key medium-term drivers of the gold price are Fed policy, US real interest rates, inflation expectations, the US dollar, central bank gold transactions and retail demand from China and India. While a softening outlook for the US economy may be seen in H2’17 and the Fed maintaining its dovish posture can change the sentimental. Also a sharp rise in geopolitical risk in the Middle East/SE Asia. A similar period occurred in 2005 and gold rallied with the US dollar.

Kedia Commodity, Mumbai Thank you Kedia Commodity, Mumbai Email: info@kediacommodity.com