Wishful thinking. That’s how Angel Gurría, secretary general of the Organisation for Economic Co-operation and Development (OECD), responded to any prospect of a swift economic recovery from the coronavirus pandemic. But the scale of the impact on the global economy – as well as our daily lives – has been matched by the scale of the financial response.
At the end of January, the new head of the European Central Bank (ECB), Christine Lagarde, announced the launch of a year-long strategic review of the bank’s monetary policy strategy. Stemming from this, there has been much discussion recently about the ECB’s existing “below but close to 2%” inflation target, and whether this needs to be made more specific, both in aim and measurement.
Multiple drivers propelled gold investment in the first half of 2019. We expect this trend to continue in the second half of the year.
Looking ahead we expect two macroeconomic trends to play a key role; financial market uncertainty and accommodative monetary policy will likely support gold investment demand.
Paul Fisher was a senior figure at the Bank of England for over 26 years – a member of the Monetary Policy Committee from 2009–2014 and Executive Director for Markets during most of the Great Financial Crisis. He considers the origins of the crisis and whether it could happen again.
In his book The Curse of Cash, leading economist Ken Rogoff suggests that excessive reliance on paper money is responsible for ills ranging from tax evasion to terrorism. He also believes that monetary policy would be more effective in a largely cashless society. Cryptocurrencies are not an effective replacement for paper money, he says, but gold’s role is likely to increase as cash fades from view.
