Gold Outlook 2018: Watch the Fed, Debt and Geopolitics

Analysts share their thoughts on the gold outlook for 2018. Most agree that it will take a sharp shock to the market to move the price significantly higher.

Although it’s up over 9 percent so far this year, the gold price didn’t perform as well as many predicted. In Q3, the yellow metal broke the $1,300-per-ounce-mark, but it couldn’t sustain that level for very long.
Political uncertainty, worldwide tensions and a softer US dollar supported prices, while risk appetite and a hawkish tone from the US Federal Reserve offset gains. As of Thursday (December 14), gold was trading at $1,253.21.
With the start of 2018 just around the corner, many investors are now wondering what will happen to gold next year. Here the Investing News Network looks at gold’s price performance in 2017 and what analysts believe is ahead for the yellow metal in 2018.

Gold outlook 2018: Price performance review

It comes as no surprise that the gold price performed with volatility in 2017. Even so, prices have nevertheless increased since the beginning of the year.
As the chart below from Kitco shows, the gold price reached its yearly peak in September, when it reached $1,346. At the time, tensions were escalating rapidly between North Korea and the US, turning investors to safe-haven assets such as gold. A weaker US dollar also supported prices.
screen-shot-2017-12-14-at-11-44-59-am
Gold’s price performance from January 1, 2017 to December 14, 2017. Chart via Kitco.
In contrast, gold’s lowest point of the year came in January, when it was changing hands for $1,150.90 due to a higher US dollar. A stronger greenback tends to make assets pegged to the currency more expensive to buyers using other monetary units.
Some market participants were expecting gold prices to increase more than they did, including Rob McEwen of McEwen Mining (TSX:MUX,NYSE:MUX), who was expecting gold to move higher this year. “I didn’t anticipate how strongly the broad market would move based on expectations that US President Donald Trump’s policies would be passed,” he said.
Similarly, Brien Lundin, CEO of Jefferson Financial and editor of Gold Newsletter, was expecting to see more of what was seen in 2016; instead gold has been performing in a “kind of a stairstep fashion.”
Rick Rule of Sprott US Holdings commented that he has been satisfied with the performance of gold this year. “Gold usually mirrors a lack of confidence, and [people have been very confident in the global economy]. The fact that gold has done well during a time with minimal turbulence says that gold has performed its job in terms of maintaining or increasing people’s purchasing power,” he noted.
Frank Holmes of US Global Investors (NASDAQ:GROW) also believes bullion has been doing well this year. “What really took it on the chin for the gold stocks was the push to go into the GDXJ (ARCA:GDXJ),” which captures 95 percent of all gold equity fund flows.
“The gold stocks have been really [downtrodden] — and a lot of people don’t understand that really it has to do with the GDXJ’s success,” he added.
On the same note, Adrian Day of Adrian Day Asset Management said gold stocks are “incredibly depressed,” explaining that “if gold is cheap relative to the financial assets … gold stocks are even cheaper because they’re cheap relative to gold on a fundamental basis, on a price basis.”
Junior Stock Review founder Brien Leni agreed, saying he was expecting to see a rebound in gold stocks prior to 2018, but “the emergence of cryptocurrencies and blockchain have taken center stage in 2017.”
Indeed, the cryptocurrency vs. gold debate has been a key trend this year, as bitcoin has outperformed the yellow metal. However, most gold market participants agree that the assets don’t compete with each other and are not comparable.
Rule commented, “I’m a fan of cryptocurrencies … [but] I think ultimately that the cryptocurrencies and gold serve a very, very different purpose, and I see them as being complementary, not competitive.”
Meanwhile, Holmes said he doesn’t think bitcoin is dismantling gold, but it’s “waking up the world on blockchain technology — the ability to send transactions inexpensively, no counterfeits [and] decentralized around the world in 10 minutes.”

Gold outlook 2018: Key factors and price predictions

The year has been full of political turmoil, with investors turning to safe-haven assets on escalating geopolitical tensions. But what will happen to the gold price in 2018?
In the longer term, Lundin believes a gold price rise is inevitable. Why? “The easy answer is debt,” he explained. “The debt load in the US is over $20 trillion. If it performs to past form, by the time Donald Trump gets out of office, it should be about $40 trillion — the record has shown that federal debt has doubled during every eight-year term of the president recently, so it’s growing. At this level it’s too large to be handled by tax hikes, spending cuts, growth.”
Similarly, David Morgan of the Morgan Report said debt remains a major issue that could impact precious metals going forward. “I think 2018 is when [the debt bomb] is going to be noticed — maybe out of the corner of your eye kind of thing — and then it’s going to become more and more apparent as we march through 2018,” he said.
Another key factor to consider moving forward is the Fed’s monetary policy. The central bank decided midway through December to hike interest rates for the third time in 2017, and market watchers are expecting at least three more rate increases in 2018.
According to Lundin, investors should not be cognizant of interest rate increases, but not necessarily concerned. The Fed’s latest policy statement “has once again straddled the line between the doves and hawks — noting how inflation has remained persistently and confoundingly low, but that economic growth remains sufficient for the central bank to plan for more rate increases in 2018,” he said.
In addition, what happens to the US dollar next year will be crucial for gold’s performance, as a softer greenback makes commodities priced in dollars cheaper for investors using other currencies.
“If 2017 marks the end of a multi-year period of U.S. dollar strength, gold could benefit from that tailwind, unlike the headwind that it has experienced since 2001,” John Reade, chief market strategist for the World Gold Council, said in a report.
Meanwhile, Holmes mentioned another point to pay attention to next year, which is that the market has reached peak gold due to a lack of technological breakthroughs. He expects that small- and mid-cap companies will be bought by the Newmont Minings (NYSE:NEM) of the world, which is an important sign that they are not, in their own exploration, finding reserves fast enough to replace their production.
“[We’re also seeing] supply restrictions from bullion hitting the market, global GDP churning up with PMI, money printing continuing along with negative interest rates,” he added.
In contrast, Louis James, editor of the International Speculator, said he doesn’t believe we have reached peak gold, but that there’s a lack of certain kinds of discoveries. “There are lower-grade deposits out there, there’s a lot of gold out there. All you have to do is notch down the grade, and at higher prices those become economic. So no, I don’t see gold being driven by a lack of discovery,” he said.
In terms of price, Leni is expecting the next leg up in the gold bull market to happen in 2018, with gold trading above $1,300 for the majority of the year. Factors supporting this price level include geopolitical tensions and a slower pace in interest rate increases.
“If we don’t see strength in the gold price, I think the next most likely scenario for the gold price is to trade within a range of $1,100 and $1,300, much like we have seen in 2017,” he added.
Firms polled by FocusEconomics estimate that the average gold price for 2018 will be $1,268. The most bullish forecast for the year comes from CPM Group, which is calling for a price of $1,322; meanwhile, Itau BBA is the most bearish with a forecast of $1,170.
Leni also mentioned that in order to manage their expectations investors should understand the difference between investing in gold and buying gold stocks. “While there is leverage, so to speak, in buying the companies, they come with much more risk and complexity” than investing in gold.

Don’t forget to follow us @INN_Resource for real-time news updates.
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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cannabis plant layered with German flag graphic
Dmytro Tyshchenko / Shutterstock

Catch up on some of the biggest news of the week for the cannabis investment world.

Three political parties have formed a coalition in Germany, leading to a new government, and it has promised cannabis reform in the European nation.

Meanwhile, a popular cannabis retailer confirmed consumers will now find its products available for delivery on the Uber Eats mobile application in Ontario.

Keep reading to find out more cannabis highlights from the past five days.


Coalition of parties promises forward-looking cannabis policy

Germany, a country with comprehensive and elaborate medicinal rules for cannabis, is in a time of transition as a new government is set to begin to take over after 16 years of Angela Merkel.

Olaf Scholz, the proposed next chancellor of Germany, leads a three party coalition that will become the country's governing body. As part of its promises, talk of adult-use cannabis regulation has now gained even more momentum. A report from MJBizDaily quotes a German policy document that shows the coalition's stance:

"We are introducing the controlled distribution of cannabis to adults for consumption purposes in licensed shops. This controls the quality, prevents the transfer of contaminated substances and guarantees the protection of minors."

However, despite the promise and excitement, it remains to be seen how these ideas will be applied since no formal regulations have been drafted or approved yet.

Canadian cannabis retailer partners with popular delivery app

Tokyo Smoke, a cannabis retail operator in Canada owned by Canopy Growth (NASDAQ:CGC,TSX:WEED), announced a collaboration agreement with Uber Canada (NYSE:UBER) whereby cannabis consumers will be able to use the Uber Eats app to order products before they visit stores.

While the app won't let consumers get cannabis delivered to them, this new method opens the doors to more dynamic ways of buying cannabis.

"As a market leader in innovation and a platform used by so many Canadians, we believe this is the ideal next offering that can be done safely and conveniently on the Uber Eats app," Mark Hillard, vice president of operations with Tokyo Smoke, said in a press release.

A report from the Canadian Press indicates Ontario is considering allowing dispensaries to have delivery and pickup options made available to consumers permanently. The province allowed some of these purchasing options at the outset of the COVID-19 pandemic, but then removed them.

Lola Kassim, general manager of Uber Eats Canada, said this new end-to-end experience will provide consumers with responsible access to legal cannabis products.

Cannabis company news

  • Organigram Holdings (NASDAQ:OGI,TSX:OGI) issued financial results for its Q4 2021 period. In its report, the company notes a net loss of C$26 million despite a 22 percent uptick in net revenue to C$24.9 million. Beena Goldenberg, the newly appointed CEO of the firm, is encouraged by the market share position earned by the company, which said it became the fourth biggest producer in Canada during the reporting period.
  • Halo Collective (NEO:HALO,OTCQB:HCANF) confirmed the decision for Akanda, its spinoff company focused on international cannabis opportunities, to begin trading on a US exchange. "The number of shares to be offered and the price range for the proposed offering have not yet been determined," the company told investors in a press release.
  • High Tide (NASDAQ:HITI,TSXV:HITI) announced the acquisition of 80 percent of NuLeaf Naturals, a CBD product wellness developer, for an estimated US$31.24 million. The deal includes a three year option clause for High Tide to complete a total acquisition. "As international markets open up and as export regulations evolve, NuLeaf's cGMP-certified facility positions us to take advantage of the global CBD business opportunity," Raj Grover, president and CEO of High Tide, said.
  • Humble & Fume (CSE:HMBL,OTC Pink:HUMBF) released the financial report for its first 2022 fiscal quarter to shareholders and the market. "As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers," Joel Toguri, CEO of Humble, said.

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Commercially viable scandium deposits are rare, making widespread use of the metal tricky. However, there is indeed opportunity in the space.

Scandium is a critical metal that is as strong as titanium, as light as aluminum and as hard as ceramic.

While it is more abundant than lead, mercury and all the precious metals, there are no pure scandium-producing mines. The rare earth element is often a by-product, produced from refining other metals, including uranium.

Pure scandium metal rarely concentrates at higher grades alongside other metals, making commercially usable scandium deposits very rare. What's more, even when scandium is found at elevated levels, processing it can be difficult, leading to very few stable sources of this critical metal.


Not surprisingly, that means there has been very little adoption of scandium in commercial applications. However, as John Kaiser of Kaiser Research has pointed out several times in the past few years, as well as more recently, that doesn't mean there hasn't been research into how scandium could be used in the future.

"Hundreds of applications (have been) filed, many of them related to alloys with aluminum," he said in an interview with the Investing News Network. "This obscure metal is going to go ballistic in the next few years."

Kaiser made that statement a few years back, and scandium has yet to go ballistic. But he still has hope for the metal, and it could yet have its day in the sun.

Below is an overview of the scandium market. Topics covered include current production, newcomers to the space and the metal's potentially bright future.

Current scandium production

The first known large-scale scandium production was associated with Russian military programs. Details are lost to history, but Russians reportedly alloyed the metal with aluminum to make lightweight MIG fighter parts. Mining at these historic Russian production sites has ceased, but stockpiles of scandium oxide and scandium master alloy remain in Russia. These stockpiles are rumored to be dwindling, but continue to be offered for sale on the market.

Today, most scandium is produced as a by-product during the processing of other ores, such as uranium or rare earths, or recovered from previously processed tailings. As a result, scandium supply can be affected by the supply and demand dynamics of the metals it is produced with. That can make the metal's already tough-to-follow market dynamics even more difficult to understand.

According to the US Geological Survey, scandium-producing countries include China, where it is a by-product of iron ore, rare earths, titanium and zirconium; and the Philippines, where it is a by-product of nickel. Scandium is also produced as a by-product of uranium in Russia, Ukraine and Kazakhstan.

More US production could be on the horizon as well after a push in legislation that encourages the Department of Defense to look into the potential uses of the metal. Environmental and construction permits have been approved for NioCorp's (TSX:NB,OTCQX:NIOBF) polymetallic Elk Creek project with probable reserves estimated to be 36 million tonnes containing 65.7 parts per million scandium.

Scandium resources have been identified in minerals-rich regions across the world, most notably in Australia, where a number of junior mining companies are working to develop scandium deposits in New South Wales. These include Scandium International Mining (TSX:SCY), which controls the Nyngan project; Clean TeQ Holdings (ASX:CLQ,OTCQX:CTEQF), which holds the Sunrise project; and Platina Resources (ASX:PGM,OTC Pink:PTNUF), which is working on the Owendale project.

Scandium price and trading

The US Geological Survey states that the global scandium market is "small relative to most other metals." This is exemplified by global production and consumption, which is only an estimated 15 to 20 metric tons annually.

The US Department of Commerce and the International Trade Commission do not have specific data on trading for the metal. Furthermore, there is no formal buy/sell market today — scandium is not traded on an exchange and there are no terminal or futures markets.

Instead, the metal is traded between private parties, mostly at undisclosed prices and in undisclosed amounts. Therefore, understanding the precise volume of production and cost of scandium is difficult, and independent estimations are more relevant.

Production estimates are based on levels of trader activity and interest, as well as the knowledge that some traders deal in the critical metal from very small operations.

The estimates also include consumers believed to be sourcing their own scandium through small, controlled recovery operations, but don't consider amounts of the metal contained in the master alloy currently being sold from Russian stockpiles.

The scandium opportunity

Analysts expect the global scandium market to grow at a compound annual growth rate of above 11 percent between 2020 and 2025. "The major factors driving the growth of the market studied are the accelerating usage in solid oxide fuel cells, and the rising demand for aluminum-scandium alloys," notes ReportLinker.

Despite the lack of known, stable supply, scientists and engineers have been working hard to develop new products incorporating the metal. Scandium's potential in high-tech applications is well documented. Highlights of the metal's properties include:

  • It can be used in the creation of stronger, corrosion-resistant, heat-tolerant and weldable aluminum alloys for lightweight aircraft and automobiles.
  • Its outstanding electrical properties and heat resistance are valuable for solid oxide fuel cells.
  • It has unique optical properties for high-intensity lamps.

A recent Kaiser Research report on scandium details the wide variety of end uses for scandium now and into the future, as well as where potential supply to meet that demand may originate.

potential scandium oxide supply and demand

Potential scandium oxide supply and demand.

Kaiser Research

As Kaiser has explained, "There's an enormous latent demand for scandium if it ever became available on a primary, scalable basis."

In other words, the only barrier to accessing demand from a new family of high-performance aluminum materials and energy/lighting products is the lack of commercially viable larger-scale scandium production. Interestingly, Kaiser's work highlights two important scandium market events that may "have the potential to launch scandium demand growth over the next decade towards a 1,000 (tonne per annum) market worth US$2 billion."

For one, Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) announced in 2020 that it has developed a route to recovery for scandium at its Sorel-Tracy facility in Quebec, where it produces titanium slag from the Lac Tio iron-titanium deposit. In mid-2021, Rio Tinto began commercial-scale operations at its new scandium oxide production facility.

"The Rio Tinto development is a game changer for the scandium sector," said Kaiser, who believes the increase in scandium production could help boost the sector.

Secondly, Scandium International Mining filed an application in late 2019 for a patent protecting a method for recovering scandium and other metals from the waste streams of copper oxide leaching operations. In mid-2020, the company announced that copper raffinate tests showed its patent-pending process could recover enough scandium to match the supply being added to the market by Rio Tinto.

"Conditions are finally right for scandium to become the ideal lightweighting solution for aluminum," Kaiser said in his note to investors.

This is an updated version of an article originally published by the Investing News Network in 2014.

Don't forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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