The World Gold Council has released its Outlook 2017: Global economic trends and their impact on gold report, highlighting three dominant themes for Europe over the next 12 months.
In the report, renowned economic and geopolitical commentator, John Nugée, predicts the following three trends for Europe in 2017: a continuation of tight fiscal and loose monetary policy; an increase in unconventional economic interventions, and growing divergence with US monetary policy.
These trends are likely to put further pressure on the euro and create rising friction between northern and southern members of the Eurozone.”
“The main thrust of economic policy in the wake of the 2008-2009 financial crisis has been to avoid a repeat of the 1930’s Depression,” Nugée remarks. “And it has not been unsuccessful. A major post-crisis recession was averted and most economies have returned to growth. But there has still been a surge of anti-establishment populism, because economic growth has come alongside growing financial inequality.”
He continues:”The rich have not only survived the post-crisis austerity but, courtesy of quantitative easing and inflated asset prices, they have done increasingly well. Seen as deeply unjust, voters now worry more about fairness and equity outcomes than economic growth alone. And there is little sign that will change in 2017: A year of elections and political negotiations beckons, against a backdrop of continued citizen unrest, and fuelled by the ongoing uneven distribution of economic welfare.”
Over the next six months, Europe faces the British invocation of Article 50, the opening shots in ensuing negotiations and important elections in the Netherlands, France and possibly Italy.
The orthodox political class will face further challenges from populist movements and candidates in these electoral battles, and Donald Trump is unlikely to be the last surprise victor in the votes to come.
For investors, this suggests a further year of volatility and surprises, as economic concerns continue to be overshadowed by political ones, and deeply held beliefs and long-established systems are challenged.
Nugée concludes: “While the UK economy is still expanding, the pound fell sharply following the referendum decision and continues to weaken every time the markets sense that there is an increased chance of a ‘hard’ Brexit.”