These 4 Factors Could (Should) Drive Gold Prices Starting This Year

According to Goldcorp, global mined gold production is likely to start declining this year, with coming years seeing continued shrinkage of mined supply.

1) 2015 was likely peak of mined gold production

Many investors tend to dismiss mined production trends, due to the fact that the overall gold market is mainly made up of existing gold already above ground which is being traded but doing so is unwise in my opinion. Gold needs to be seen as a currency and the miners need to be seen as this currency’s central bank in many ways. Just like a central bank, miners add to the supply every year. With less and less supply being added every year in coming years, and perhaps permanently, the scarcity value of gold is set to increase.

2) Stock Market Stagnation.

I believe that the main factor that ended the bull run in gold at its $1,900 peak, was the strong performance of the stock market. This concept should not be too hard to grasp. Money always follows the investment with the best possible potential return.

The year 2012 was the year in which, perhaps for the first time, saw the return of some confidence in the economic recovery. With that came the realization that stock indexes were set to embark on a very strong run, while gold had already had a very strong, more than a decade old bull run by then. Therefore, there was little reason to expect that there was much up-side left and as such, made no sense to leave money stranded in gold, while it became rather obvious that there was a much better opportunity elsewhere.

With 2015 seeing stock market averages flat and to a large degree down around the world and no evidence so far this year that there will be much up-side, stocks are no longer such an attractive alternative to gold. In fact, a reverse of the situation is happening, with stocks now looking largely overvalued within the context of an economy that is rather wobbly, and let us not forget also a Federal Reserve which is no longer looking to pump up assets with cheap money. Within that context, stocks are what gold was at its peak of over $1,900/ounce.