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Launch of Metals Focus’ Gold Focus 2018

By Nikos Kavalis, Director, Metals Focus

Published on April 17, 2018

In early April, Metals Focus launched Gold Focus 2018, its flagship annual publication on the gold market. The report features comprehensive historical supply and demand statistics and a detailed 2018 forecast. It was launched at four events, in London, Toronto, Dubai and Mumbai; a follow-up event is scheduled in Singapore on 25 April.

Looking at some of the main findings of the publication, following a good December run, the gold price has moved broadly sideways since the start of 2018. This lack of direction can in turn be blamed on a lack of decisive triggers in the market. Metals Focus believes such range-bound conditions will probably persist over the second quarter of 2018, as conflicting drivers are at play. However, Metals Focus expects gold prices to break higher in the second half of the year, testing $1,450 before the end of 2018.

The range trading that gold is currently facing reflects number of challenges, some of which were also present throughout 2017. First, the vast majority of professional investors are continuing to focus on equity markets, despite the volatility spikes we have seen at times this year. Second, rising bond yields are pushing up the opportunity cost of holding gold. Third, after trending down for much of last year, the US dollar has recently been more resilient. Lastly, ongoing rate hikes by the US Federal Reserve Bank remain a negative factor for gold. Together, these factors are likely to limit gold’s upside in the near term.

Table 1: Global gold supply/demand (tonnes) and percentage change year-on-year.

Looking further ahead this year, however, Metals Focus expects that global market conditions will become more positive for the gold price. In part, this is premised on our expectation that the dollar will resume its secular downtrend. Concerns about the ballooning US government debt, the possibility of a further flattening of the US yield curve and expectations of monetary policy tightening in Europe should sooner or later weigh on the US currency. Meanwhile, we believe that the volatility that equity markets experienced in the first few months this year will be an ongoing theme over the rest of 2018, which would eventually also benefit gold. Although at times US interest rate increases may act as a headwind, their impact on the gold price will be limited as they are largely priced in.

Figure 1: Gold price forecast for 2018.
Figure 2: Global gold supply.
Figure 3: Global gold demand.
Figure 4: Gold price, 2010–2016.

In addition to the above, tail-risks will underpin gold, even if they do not actually crystallise. Among these, rising trade protectionism and the possibility of outright trade wars stand out. Geopolitical risks have apparently dissipated, given the recent thawing in North Korea’s relationships with South Korea and the US. However we caution that it is still too early to predict the outcome of Korean talks. Meanwhile, the recent appointment of Mike Pompeo and John Bolton as Secretary of State and National Security Advisor, respectively, point to a growing likelihood that the US will pull out of the Iran nuclear deal, which could unsettle markets.

In terms of gold’s fundamentals, Metals Focus expects jewellery fabrication to touch a three-year high in 2018, rising by 2%. Physical investment is also expected to improve, by 4%, while net official sector purchases are projected to decline marginally. Gold mine supply, on the other hand, will mark a decade of growth, edging higher in 2018, albeit by just 0.1%, to a new peak.

Looking at the demand side in more detail, Asia, driven by India and China, is expected to provide much of the fuel for the increase in the global total. The outlook for Indian jewellery and investment remains positive and we expect both to increase by around 3% year-on-year. The former should be boosted by the Indian government’s focus on lifting farm incomes, while the latter should profit from growing risk aversion in the face of the recent correction in local equities. Both should also benefit from a positive outlook towards the rupee gold price.

Moving to China, a healthy outlook for the country’s economy and continued structural changes in the local jewellery industry should result in a further, albeit modest, increase in jewellery fabrication. Premium 999-purity products, 22-carat and 18-carat pieces will continue to spearhead this trend, gaining further market share from conventional products. Meanwhile, we forecast a 7% increase in physical investment, as a result of ongoing portfolio diversification against the backdrop of a limited range of locally available investment opportunities.

Elsewhere across much of Southeast Asia, the outlook for gold demand in 2018 also looks positive. We expect to see gains in jewellery demand in most countries, including Malaysia, Indonesia, Thailand and Vietnam, which all enjoy year-on-year gains within a 3-6% range. Improving economies in local and key export markets underpin these gains and, in some cases, also encouragement from local policy changes. Similar factors should also drive regional physical investment demand, for which we forecast virtually all countries we cover in Southeast Asia to experience gains or at least stability.

Nikos Kavalis is a founding partner of Metals Focus. He has over 14 years of experience working as a metals analyst/strategist for the Royal Bank of Scotland in London and as a metals analyst for GFMS. Nikos holds a BSc in Econometrics and Economics from the University of York and MSc in Econometrics and Mathematical Economics from the London School of Economics.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

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Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
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