When investors in Germany buy gold, they tend to do so with the intention of protecting their wealth, while also keeping one eye on making good long-term returns. That was a finding from our 2019 survey of over 2,000 German retail investors, as part of a larger global survey of more than 12,000 investors across six markets. The research revealed that almost half of German retail investors buying gold bars and coins felt that the main role of their gold investment was to protect their wealth, with around one third focusing on good long-term returns (in excess of inflation).
And, according to the recently-published results of Pro Aurum’s 2020 annual Forsa survey, greater numbers of German investors now expect gold to help them achieve these investment objectives than last year. The survey shows that 31% of respondents voted gold as the investment product most likely to generate the best returns over the next three years, ahead of stocks with 25%. The 2019 survey saw gold receive 26% of votes, second place behind stocks (28%).
Our global survey identified that – at a global level – risk management was the key trigger for investments in gold in the 12 months preceding the survey.1
As we indicate in The relevance of gold as a strategic asset ‘Gold has consistently benefited from “flight-to-quality” inflows during periods of heightened risk. It is particularly effective during times of systemic risk, delivering positive returns and reducing overall portfolio losses.’
As German investors seem to intuitively understand gold’s risk-hedging properties, it is worth paying attention to the finding from our research that 37% of German retail investors have never bought gold before but would consider buying it in the future. Might the current relatively risky environment encourage them to do so?
This is just a small subset of the insights that our detailed German market report – scheduled for publication later in the year – will reveal about the specific drivers and behaviours related to gold investment in that market. In the meantime, please see retailinsights.gold for data generated by the global survey and for India-specific gold market insights.
Footnotes
1 This refers to the 12 months preceding survey fieldwork, which took place in Q2 and Q3 2019
Our Chief Market Strategist, John Reade recently presented at the Pensions Age virtual conference, which took place in June.
From the many conversations that we have with institutional investors, we know that they continue to embrace alternatives to traditional stocks and bonds in pursuit of diversification and higher risk-adjusted returns.
For those adding commodities to the alternative segment of their portfolio, many gain access to gold via a commodity index but this exposure fails to showcase gold’s role as a strategic asset.
This webinar showcases the difference in the role of gold as a stand-alone asset compared to broader commodity indices. For further reading on this topic, please click here.
Our Head of Americas and Global ETFs, Joe Cavatoni, joined an expert panel this week for a NYSE webinar ‘Investing in Real Assets: 2020 Mid-Year Market Outlook’.
In this video, our Managing Director, US, Joe Cavatoni discusses our Gold mid-year outlook 2020 with Maria Rosati, Contributing Editor at WealthManagement.com.
We often discuss the fundamental drivers of gold as being a function of economic expansion, risk and uncertainty, opportunity cost and momentum.
Given the recent increase in gold pricing to new all-time highs in US dollars, it is relevant to discuss the current momentum of gold within the context of tactical positioning; specifically, the impact of technical indicators on the price of gold.
Market technicians focus their time on identifying chart patterns and their implications on future prices. This is certainly a component to commodities’ price behavior and gold trading in particular.
With the recent surge to all-time highs, gold completed a bullish “cup-and-handle” formation which began in March of this year, through its recent breakout. The “cup” formed as the price of gold sold off during the early part of the COVID crisis and completed the “cup” as gold rallied after central banks cut rates and began their most recent rounds of economic stimulus.
The subsequent “handle” or period of time with minimal price movement left gold near $1,700 for the better part of the past three months. Over the past month, gold broke out above $1,700, while reaching over $1,950, or the projected price based on the technicals.
Source: World Gold Council, Bloomberg
Generally speaking, a market technician will measure the distance from the bottom of the cup to the handle, in this case approximately $1,450 to $1,700. The projected price is generally that difference added to the price of “the handle”. In this instance, the $250 depth of the cup suggested a technical price move of $1,700 to $1,950, precisely what occurred recently.
Another technical indicator, the relative strength index (RSI), measures the magnitude of price changes to overbought or oversold conditions. This number oscillates between 0 and 100 with numbers above 70 overbought and numbers above 80 extremely overbought. The oversold conditions of an RSI near 30 in March preceded the recent 14-day RSI (the most widely used time horizon) of 88, suggesting gold could be overbought in the short term.
Source: World Gold Council, Bloomberg
Finally, historical high and low prices, particularly all-time prices, often act as a point of resistance or support, sometimes based on a behavioral bias from investors.
Gold remains an important long-term strategic component to portfolios for a number of reasons. Elevated stock valuations, easy money, low rates, geopolitical risk, and of course, the uncertainty about the long-term COVID impact are all reasons to have exposure to gold. And these are some of the reasons it has been one of the best performing assets in 2020.
Technical analysis remains just one of the many “tools” in the investment toolbelt and market pricing sometimes ‘ignores’ patterns. However, in the short term, many of the aforementioned technical indicators suggest gold could, at the very least, pause from its year-to-date run of 27%.
Latest research
Looking for insight and analysis on gold? Our team of experts produce market-leading research and macroeconomic commentary on gold.
Safety and expected returns attract German investors to gold
Louise Street
Senior Markets Analyst World Gold CouncilWhen investors in Germany buy gold, they tend to do so with the intention of protecting their wealth, while also keeping one eye on making good long-term returns. That was a finding from our 2019 survey of over 2,000 German retail investors, as part of a larger global survey of more than 12,000 investors across six markets. The research revealed that almost half of German retail investors buying gold bars and coins felt that the main role of their gold investment was to protect their wealth, with around one third focusing on good long-term returns (in excess of inflation).
And, according to the recently-published results of Pro Aurum’s 2020 annual Forsa survey, greater numbers of German investors now expect gold to help them achieve these investment objectives than last year. The survey shows that 31% of respondents voted gold as the investment product most likely to generate the best returns over the next three years, ahead of stocks with 25%. The 2019 survey saw gold receive 26% of votes, second place behind stocks (28%).
Our global survey identified that – at a global level – risk management was the key trigger for investments in gold in the 12 months preceding the survey.1
Considering the environment of sharply heightened risk that has prevailed in 2020 so far, these findings chime with the huge increase in German gold investment witnessed in recent months, with risk being one of the drivers, along with low/negative interest rates. Our Q1 Gold Demand Trends report highlighted a four-year high in bar and coin investment in Germany in the first three months of the year, following the strong December uptick noted by the Perth Mint.
As we indicate in The relevance of gold as a strategic asset ‘Gold has consistently benefited from “flight-to-quality” inflows during periods of heightened risk. It is particularly effective during times of systemic risk, delivering positive returns and reducing overall portfolio losses.’
As German investors seem to intuitively understand gold’s risk-hedging properties, it is worth paying attention to the finding from our research that 37% of German retail investors have never bought gold before but would consider buying it in the future. Might the current relatively risky environment encourage them to do so?
This is just a small subset of the insights that our detailed German market report – scheduled for publication later in the year – will reveal about the specific drivers and behaviours related to gold investment in that market. In the meantime, please see retailinsights.gold for data generated by the global survey and for India-specific gold market insights.
Footnotes
1 This refers to the 12 months preceding survey fieldwork, which took place in Q2 and Q3 2019
On Twitter: Juan Carlos Artigas discusses measuring gold’s performance
Juan Carlos Artigas
Regional CEO (Americas) and Global Head of Research World Gold CouncilJuan Carlos Artigas
Regional CEO (Americas) and Global Head of Research World Gold CouncilGold at $1800/oz: a short thread.
John Reade
Senior Market Strategist World Gold CouncilJohn Reade
John Reade
Senior Market Strategist World Gold CouncilJohn Reade
Webinar: John Reade at the Pensions Age virtual conference
John Reade
Senior Market Strategist World Gold CouncilOur Chief Market Strategist, John Reade recently presented at the Pensions Age virtual conference, which took place in June.
From the many conversations that we have with institutional investors, we know that they continue to embrace alternatives to traditional stocks and bonds in pursuit of diversification and higher risk-adjusted returns.
For those adding commodities to the alternative segment of their portfolio, many gain access to gold via a commodity index but this exposure fails to showcase gold’s role as a strategic asset.
This webinar showcases the difference in the role of gold as a stand-alone asset compared to broader commodity indices. For further reading on this topic, please click here.
Webinar: Joe Cavatoni joins an expert panel to discuss Real Assets
Joseph Cavatoni
Senior Market Strategist, North America World Gold CouncilOur Head of Americas and Global ETFs, Joe Cavatoni, joined an expert panel this week for a NYSE webinar ‘Investing in Real Assets: 2020 Mid-Year Market Outlook’.
Topics discussed include...
Interview: Gold mid-year outlook 2020
Joseph Cavatoni
Senior Market Strategist, North America World Gold CouncilIn this video, our Managing Director, US, Joe Cavatoni discusses our Gold mid-year outlook 2020 with Maria Rosati, Contributing Editor at WealthManagement.com.
Topics include
All-time highs for #gold – a thread
Gold hit a new all-time high this morning, posting
John Reade
Senior Market Strategist World Gold CouncilJohn Reade
John Reade
Senior Market Strategist World Gold CouncilJohn Reade
Is gold ready for a pause technically?
Adam Perlaky
Former Senior Analyst, Americas World Gold CouncilWe often discuss the fundamental drivers of gold as being a function of economic expansion, risk and uncertainty, opportunity cost and momentum.
Given the recent increase in gold pricing to new all-time highs in US dollars, it is relevant to discuss the current momentum of gold within the context of tactical positioning; specifically, the impact of technical indicators on the price of gold.
Market technicians focus their time on identifying chart patterns and their implications on future prices. This is certainly a component to commodities’ price behavior and gold trading in particular.
With the recent surge to all-time highs, gold completed a bullish “cup-and-handle” formation which began in March of this year, through its recent breakout. The “cup” formed as the price of gold sold off during the early part of the COVID crisis and completed the “cup” as gold rallied after central banks cut rates and began their most recent rounds of economic stimulus.
The subsequent “handle” or period of time with minimal price movement left gold near $1,700 for the better part of the past three months. Over the past month, gold broke out above $1,700, while reaching over $1,950, or the projected price based on the technicals.
Source: World Gold Council, Bloomberg
Generally speaking, a market technician will measure the distance from the bottom of the cup to the handle, in this case approximately $1,450 to $1,700. The projected price is generally that difference added to the price of “the handle”. In this instance, the $250 depth of the cup suggested a technical price move of $1,700 to $1,950, precisely what occurred recently.
Another technical indicator, the relative strength index (RSI), measures the magnitude of price changes to overbought or oversold conditions. This number oscillates between 0 and 100 with numbers above 70 overbought and numbers above 80 extremely overbought. The oversold conditions of an RSI near 30 in March preceded the recent 14-day RSI (the most widely used time horizon) of 88, suggesting gold could be overbought in the short term.
Source: World Gold Council, Bloomberg
Finally, historical high and low prices, particularly all-time prices, often act as a point of resistance or support, sometimes based on a behavioral bias from investors.
Gold remains an important long-term strategic component to portfolios for a number of reasons. Elevated stock valuations, easy money, low rates, geopolitical risk, and of course, the uncertainty about the long-term COVID impact are all reasons to have exposure to gold. And these are some of the reasons it has been one of the best performing assets in 2020.
Technical analysis remains just one of the many “tools” in the investment toolbelt and market pricing sometimes ‘ignores’ patterns. However, in the short term, many of the aforementioned technical indicators suggest gold could, at the very least, pause from its year-to-date run of 27%.