2014 has proven to be a watershed year for gold. Not only is the multi-year bull run dating back to 2001 set to come to an end, but physical demand for the lustrous metal has also punched record levels, particularly from exciting developing markets.
And I believe that a blend of swirling macroeconomic uncertainty, combined with resilient jewellery consumption, should drive prices higher once again next year. If you share my enthusiasm and want to bet on a rising gold price, then exchange-traded funds (ETFs) SPDR Gold Trust (NYSEMKT: GLD.US) and Gold Bullion Securities (LSE: GBS) are a great way to play the gold market.
Look East for the future of gold demand
The latest quarterly trends report from the World Gold Council (WGC) showed global demand for bars, coins and jewellery surge more than a quarter in the first nine months of 2013, to a record 2,896.5 tonnes. This eye-watering growth was put down to swelling demand from Asia and the Middle East, regions that were responsible for 90% of the 600-tonne increase.
The organisation attributed this to lower gold prices, strong brand promotion in these geographies, and improved signs for the global economy due to bullish economic data from the US. Although the global economic picture remains fragile, the same drivers that pushed gold consumption higher during January-September remain in place and could underpin further strength in 2014 and beyond.
Furthermore, the WGC noted that demand for gold of a higher carat has also risen across the world, underlining the metal's appeal as an investment asset as well as aesthetic and sentimental item. As loose monetary policy across the globe, exacerbated by rolling quantitative easing in the US, looks set to reign well into the new year and drive inflationary fears skywards, demand for the golden hard currency should remain bubbly.
Chinese inflows continue to climb
And future demand growth from emerging regions look likely to continue to be led by China, which is rapidly usurping India as the world's number one gold market.
Latest trade data showed imports from Hong Kong rise to more than 131.2 tonnes in October, the second highest on record after March's record high, Reuters reported. Total imports during January-October came in at 986 tonnes, double the amount seen during the corresponding 2012 period.
In my opinion, the classic fundamentals of rising populations in these emerging regions, combined with a rising middle class and with it disposable income levels, should shuttle physical gold demand higher well into the future.
The golden rules to becoming a market millionaire
Like gold, silver can also benefit from safe-haven buying during periods of macroeconomic uncertainty. In this respect ETF iShares Silver Trust (NYSEMKT: SLV.US) is an effective way to gain exposure to the metal price. And silver can also benefit during times of rising global activity, its position as a dual-role metal for both investment and industrial purposes allowing it to enjoy the best of both worlds.
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> Royston does not own shares in SPDR Gold Trust, Gold Bullion Securities or iShares Silver Trust.