'Gold market will benefit from emerging economies'

Increasing prosperity in emerging economies will provide a boost to the gold market over the next three decades. This is what the World Gold Council in a preview of the global gold market. An expansion of the middle class in key markets such as China and India and an increase in disposable income will enable more people to live in emerging markets. Buy gold, either in the form of jewellery and investment gold or in the form of financial products backed by precious metals.

In the report, the World Gold Council writes that the share of the six major emerging economies - China, Brazil, India, Mexico, Russia and Turkey - in the global economy has increased sharply over the past thirty years. Whereas in 1987 these six countries accounted for only 6.2% of global GDP, by 2016 this had already increased to 24.4%. By comparison, in the same period, the share of the G6 countries – United States, United Kingdom, France, Germany, Italy and Japan – fell from 65% to 45% of global GDP.

Emerging economies

Gold-leaning emerging economies are expected to account for a larger share of the global economy in the future. This means that the market for investment gold and jewellery is also likely to increase further. Also, the increased prosperity could create more demand for gold within the technology sector, which currently uses about 10% of the annual global supply.

Here's what the World Gold Council writes about the shift of wealth towards emerging countries:

"Over the next decade, China's nominal GDP per capita is expected to reach a level of $45,000, about 65% more than the global average. By 2050, it could even increase to $120,000, double the global average and half the level in the United States.

The number of middle-class households will increase significantly. Taking into account the growth of income and a more equal distribution of wealth, the share of middle-class households will rise to 74% in 2020 and will represent a majority of the population in 2035.

We believe that the future growth of the global economy will be driven by emerging markets, as more workers also become active consumers. This is likely to lead to a shift in economic power from the developed world to emerging markets."

Gold as an asset

According to the World Gold Council, the gold market in countries such as China and India will continue to grow in the future, because an average household in these countries still has more confidence in physical assets than in financial products such as stocks and bonds. In Western economies, most people see gold as an investment, while in other non-Western cultures the precious metal is often seen as a form of savings or wealth.