DEMAND DRIVERS
The interplay between market risk and economic growth is expected to drive gold demand globally
Photo by: Bloomberg
Many African countries are traditionally gold-producing, but there could be significant growth in gold demand in the long term for the continent, says market development organisation for the gold industry World Gold Council (WGC) market intelligence head Alistair Hewitt.
Africa has the youngest population globally and the continent may benefit from a massive demographic dividend, which will boost wealth and earnings, he tells Mining Weekly.
He explains that growing urbanisation will result in more large cities being built in Africa, which could potentially lay the foundations for increased incomes and wealth.
“In our analysis, these factors are strong drivers of gold demand. It is intuitive to think that when people have more money, they will start thinking about where and how to save.”
Gold lends itself to being an extremely effective form of saving, he advances.
Moreover, Hewitt mentions that there are large areas in Africa that do not have traditional banks; instead, there is a rapid uptake of fintech – using mobile phones to manage bank accounts. The rapid development of mobile technology also enables people to buy gold for small amounts, he adds.
These factors may support the growth of gold demand in Africa, Hewitt highlights.
One such fintech solution is the fintech savings platform HelloGold, which announced its entering Africa with digital financial inclusion group Baobab as a partner last month.
The companies will jointly develop products for Baobab’s 800 000 clients in Burkina Faso, the Democratic Republic of Congo, Côte d’Ivoire, Madagascar, Mali, Nigeria, Senegal, Tunisia and Zimbabwe.
The WGC’s ‘Outlook 2019’ report, released in January, indicates that the interplay between market risk and economic growth is expected to drive gold demand globally.
The report expects three trends – financial market instability, monetary policy and the US dollar, and structural economic reforms – to influence the gold price.
The council expects that increased market uncertainty and the expansion of protectionist economic policies will make gold increasingly attractive as a hedge, and while gold may face headwinds from higher interest rates and US dollar strength, these effects are expected to be limited, as the Federal Reserve has signalled a more neutral stance.
Moreover, structural economic reforms in key markets will continue to support demand for gold in jewellery, technology and as a means of savings.
The report notes that these factors are likely to continue making gold attractive in the near term, while the development of the middle class in emerging markets, gold’s role as a last-resort asset and its ever- expanding use in technological applications will support it in the longer term.