Gold In 2048

The Next 30 Years for Gold

In May, the World Gold Council published a report titled “Gold 2048: The next 30 years for gold.” The publication starts with the George Magnus’s overview of global economic trends between now and 2048.

The first big trend will be the further growth of developing countries and the rise of the emerging-market middle class. In particular, China’s GDP growth will shift to global average levels, as its economy evolves and matures, while India has the potential to become the fastest-growing economy in the world over the next three decades.

The second trend will be demographics: the China’s age structure will deteriorate, while Africa will gain two billion people of the working age, more than the increase in the rest of the world combined.

The author also predicts more redistributive policies as a response to automation and expects periods of macroeconomic instability and geopolitical turmoil, as “a multilateral world order from which the US is retreating as a benign hegemon, and in which China, Russia, Iran and Turkey want to assert their presence, is a recipe for disorder.” His conclusions are as follows:

Add in rising geopolitical tensions, climate change and unwanted migration flows and the world could be a volatile place. In such an environment, gold may prove an effective investment for the coming decades

Fair enough. It’s true that gold should shine during periods of easy fiscal policy, macroeconomic instability and geopolitical crisis. However, the article looks more like a wish list, or a list of potential risks, than a true analysis. The article says nothing about timing, which is key in (precious metals) investing. And investors should remember that gold’s reaction to geopolitical events is limited.

The Investment Market in 2048

Rick Lacaille makes his own forecast. He believes that equities should continue to outperform, subject to market cycles, but returns may be lower. With lower returns and technology that facilitates access to more asset classes and strategies, Lacaille expects that alternative asset classes, including gold, will be more widely used. Well, it may sense that more people will have access to gold investment. Good news for the gold market, indeed.

Our Take

Forecasting for 30 years is a hopeless task, but lets our imagination run wild. We are generally optimistic about the world, as the rise of emerging markets creates new opportunities. We bet that new Einstein has been already born in Beijing or Mumbai. And we live on a verge of technological and scientific revolution. This is bad news for the yellow metal.

However, the next recession will occur for sure between now and 2048. Given the elevated valuations of many asset markets, large debt levels and still unresolved structural problems in many economies, the impact of the crash can be strong. Then, the interest rates will be cut again and the investment demand for gold should increase, especially if the U.S. dollar loses its position. It’s far from being certain, but China’s development challenges it for sure and the loose U.S. fiscal policy does not help here. One thing is certain: there will be ebb and flow in the gold market, in line with perceptions of stability and economic growth prospects. Be prepared for many changes, often wild, but one thing will not change: gold will continue to be recognized and appreciated monetary asset and the safe haven in times of turmoil.