Long-term drivers of gold from key categories including economic expansion, market risk, opportunity cost and momentum.
Gold prices are determined by the interaction of drivers from four key categories: 1) wealth and economic expansion; 2) market risk and uncertainty; 3) opportunity cost; and 4) momentum and positioning. The first two play a particularly important role in gold’s long-term performance and form the basis for strategic reasons to buy and invest in gold.
There is a positive link between gold prices and economic growth via demand for gold in the form of jewellery, technology and long-term savings. This is particularly true in developing economies where gold is often used as a luxury item and a means to preserve wealth.
Market risk and uncertainty are equally relevant to gold’s long-term performance. Many investors view gold as the ultimate safe haven - effective in hedging currency depreciation, high inflation, and other systemic risks.
In addition, other macroeconomic variables such as interest rates may increase or decrease the relative cost of holding gold. And price momentum and similar trending variables can further enhance or depress the direction of gold’s performance.