The Donald J. Trump era is marking a new age for gold as an investor safe haven.
While the precious metal has always been hoarded in times of trouble, a bevy of political and economic surprises in 2016 sparked a surge in buying that sent bullion to the first annual gain in four years. Prices may rally about 13 percent in 2017, according to a Bloomberg survey of 26 analysts.
Fueling the bullish outlook is the risk of chaos on multiple fronts: a possible trade war from America's fraying relationship with China, the alleged Russian hack of U.S. political parties, the U.K.'s complicated exit from the European Union, and elections slated in France, Germany and the Netherlands that may see a rise of nationalist groups.
And then there are Trump's frequent Twitter posts, in which the U.S. president-elect feuded with rivals and made declarations that unsettled allies even before he takes office Jan. 20.
"140 characters of unfiltered Trump is likely to create tensions with America's largest trading partners," Mark O'Byrne, a director at broker GoldCore Ltd. in Dublin, said by e-mail. "Markets that are already shaken by the fallout from Brexit, the coming elections in Europe and indeed the increasing specter of cyber warfare could again see a safe-haven bid."
Gold for immediate delivery is up 8.9 percent this year to $1,155.12 an ounce, halting a three-year slide. More than two thirds of the analysts and traders surveyed from Singapore to New York said they were bullish for 2017.
Demand Growth?
The median year-end forecast was $1,300, with the year's peak seen at $1,350. Two, including O'Byrne, said the metal may reach $1,600.
Demand for bullion would get a boost if elections in Europe see gains by anti-establishment parties, according to Commerzbank AG analysts led by Eugen Weinberg. Increased protectionist policies and the potential for a trade war between Trump's administration and China may also help push gold higher, they said.
In a growing number of countries, "there are nationalistic tendencies, more isolationist tendencies," said Peter Marrone, the chief executive officer of Toronto-based Yamana Gold Inc., which owns mines in Canada and South America. "That will create geopolitical and socio-economic volatility, perhaps instability, certainly risk."
That doesn't mean there aren't reasons to be bearish. After starting 2016 with the biggest first-half rally in four decades, prices fell from their peak in July and investors have cut back on bullion holdings. That was mostly because an improving U.S. economy and higher interest rates made other assets more attractive, including equities.
