Investment Commentary

A recent FT article highlighted research from Moody’s which has estimated that global households have saved an extra US$5.4tn since this start of the COVID pandemic. This, the article goes onto say, could pave the way for a strong rebound in consumer spending, boosting the economic recovery.

Since the start of the year, economic optimism has generally been on the rise. Stock markets have continued to rally, and yields have risen as investors have switched their attention to potential inflationary pressures that come with economic expansion. Much of this is thanks to the unprecedented levels of monetary and fiscal stimulus from governments across the globe. Against this backdrop, gold has struggled. And some might think that a wave of consumer spending, propelling economic growth higher can only be negative for an asset considered a hedge against financial turmoil.

But, while risk and uncertainty may be lower, the potential impact on gold is a little more nuanced than some investors might realise. So, how might this increased stock of savings impact gold then? Well, for this we can look to gold’s dual nature, both as an investment and a consumer good. Gold’s different sources of demand, and how they impact gold’s behaviour, are key to understanding its diversification benefits.

Gold has a dual nature

Average annual net demand ≈ 3,100 tonnes* (approx. US$177bn)

Jewellery and technology demand can benefit from higher discretionary spending. Far from being negative, economic expansion is a positive force on certain elements of gold demand. Those consumers who are benefitting from bolstered budgets may seek to spend some of this on gold. Jewellery and technology demand, which combined account for around an average of 40% of annual net gold demand, are both pro-cyclical, meaning they are strongly linked to income growth and economic expansion. Higher discretionary spending could lead to higher demand for both. In fact, we are already starting to see signs of that with robust jewellery demand in both China and India, the two largest gold markets, in Q1.

Investment demand might also be supported despite lower uncertainty. While the counter-cyclical portion of investment demand – that linked to risk and uncertainty – may decline due to the more positive economic outlook, an element of investment might benefit from this higher level of savings. Consumers, aware that they are facing ultra-low or negative interest rates on their savings and the prospect of inflation, may opt to convert some of this into gold as it is a proven store of value. Again, there has already been evidence of this during Q1, with record levels of demand for gold coins from both the US and Perth Mint.

The conversion of the estimated US$5.4tn of savings into consumption has the potential to catalyse a rapid global economic recovery. But this positive development is not necessarily bad for gold. There has already been evidence of this so far in 2021, something we will continue to watch with interest for the rest of the year.

The full picture of gold demand in Q1 2021 will be covered in the forthcoming issue of Gold Demand Trends, published on 29 April.

In this article for Pensions Age, I review the key findings from a recent World Gold Council/Pensions Age poll and highlight why gold might provide an answer.

In many ways you could be forgiven for thinking 2020 never ended. While optimism has risen recently, with many hopeful that the worst is over, there are nonetheless several significant risks which investors must still face.

The development and ultimate roll-out of vaccines has been a giant leap in the global fight against Covid-19 but concerns around the long-term well-being of the global economy continue to dominate the agenda. Governments have unleashed unprecedented amounts of fiscal stimulus and central banks have committed to keeping interest rates low in the short term, as well as indicating a greater tolerance for higher levels of inflation.¹

These actions, while understandable, could have far-reaching consequences for investors. Expanding budget deficits and growing money supply may increase inflationary pressures, while prolonged periods of loose monetary policy may impact asset performance and distort asset allocations for years to come.

For pension funds the stakes are particularly high. With depressed bond yields reducing income and low interest rates inflating future liabilities, this has led to more fund managers considering increasing portfolio allocations towards alternative investments. A recent snap poll conducted jointly by the World Gold Council and Pensions Age highlights how portfolio strategies are expected to evolve in response to the new financial environment.

How do you think your asset allocation will change during 2021?

Respondents indicated that they planned to increase allocations to infrastructure (56%), private equity/debt (36%) and real estate (14%), at the expense of more mainstream asset classes such as equities and, to a lesser extent, cash. Findings from Willis Towers Watson also show that by the end of 2020 alternative assets accounted for 26% of all pension fund assets, up from 23% in 2019.²

While these asset classes have the potential for greater returns, thereby helping to plug the funding deficit in the UK, our analysis has revealed that they can be associated with lower levels of liquidity and higher levels of volatility.³ This represents a significant risk for pension funds aiming to achieve their funding targets and manage costs.

Gold, on the other hand, is still relatively under-owned by pension funds, and the findings from the poll confirm this. Less than a third (31%) of respondents hold an allocation to gold, and of those that do, 69% only had an allocation between 1-2% of their overall portfolio.

With many pension funds looking to de-risk their long-term liabilities, there is a need to protect yield as well as generate it. For this reason, we believe that an investment in gold can address these concerns. During periods of heightened risk and uncertainty, gold has historically benefitted from flight-to-quality flows, providing both positive returns and helping to reduce portfolio losses. The gold price, measured in pounds sterling, has increased by an average of almost 12% per year since 1971⁴ , and over multiple time periods since then gold has outperformed a number of equity, fixed income, and commodity indices. This is significant given gold does not pay a coupon or dividend since, and as a hard currency, it carries no credit risk.

The global gold market is large and liquid, meaning it can be bought and sold with relative ease when liabilities need to be met. Average trading volumes – which include estimated OTC flows and exchange-traded volumes - increased to over $180 billion per day in 2020; up from $145 billion per day in 2019. Furthermore, gold’s liquidity profile is a well-recognised attribute amongst respondents, with almost two-thirds (65%) perceiving gold as a liquid asset.

What percentage of your portfolio is currently allocated to gold?

Gold is a proven and effective portfolio diversifier. Our analysis demonstrates that gold generally has a positive correlation when equities rise but, crucially, a negative correlation during risk-off periods. And this correlation to risk assets does not only work in times of crisis; gold’s dual nature as an adornment and an investment supports gold’s long-term price trends through income growth.

However, nearly three quarters of respondents (72%) also associate gold with greater levels of volatility. As with any asset, an allocation is by no means risk free, and its price may fluctuate in the short term. But over the long term, gold’s annualised volatility has averaged 16-17%, substantially less than other traditional asset classes such as equities and fixed income.

ESG and climate related investment

Environmental, social and governance (ESG) issues are increasingly top-of-mind for investors. In fact, impact awareness is now often intertwined with risk and return. When asked, 79% of respondents agreed that ESG factors are decisive in shaping their asset allocation strategy.

These are not just driven by societal expectations, but also by continued changes to legal and regulatory frameworks. In a series of coordinated statements in November 2020, the UK government, and regulatory authorities (such as the FCA and the Bank of England) confirmed the direction of travel regarding regulations around sustainable finance. Greater reporting requirements and disclosures for pension funds in relation to climate-related risks and impacts have been introduced.

Here too, gold can play a role: 71% of those surveyed disagreed with the statement that gold does not meet ESG requirements according to their investment policy. This highlights the strides the gold mining industry has made to ensure that gold is produced sustainably and sourced responsibly. Key market participants across the supply chain have developed and adhered to a range of industry initiatives and standards, boosting confidence in the provenance of gold as a responsibly sourced asset. There is also strong evidence that gold can play a constructive role in mitigating climate-related risks, helping to enhance portfolio resilience to climate change impacts.⁵

Average daily volatility of several major assets since 2000*

Conclusion

Pension funds continue to face a raft of challenges, forcing a shift in both their investment approach and asset allocation strategies. To navigate the new financial landscape ahead, both traditional and alternative investments should be considered to help balance risk, return, and impact. Gold’s unique characteristics, which help set it apart from other mainstream assets, could bring multiple benefits to a pension fund portfolio; not only helping to manage overall risk but as a means of diversifying returns over the long term.

With inflation and interest rates increasingly top of mind for investors, the World Gold Council, in partnership with State Street Global Advisors, invited renowned financial author and historian James Grant of Grant’s Interest Rate Observer to share his perspectives on the direction of monetary policy and implications for gold and the broader markets.
 

“…gold - to me, it's not a hedge against monetary disorder. It is an investment in monetary disorder, which is what we have"

The volatility of numerous assets has shifted along with the performance of gold, which has recently rebounded to nearly flat on the year. Given this shift, we consider it important to assess the current gold market conditions from a volatility and derivatives perspective, along with what technical charts are suggesting about where gold could move in the near- and long-term. We believe that regardless of an investor’s gold sentiment, the following conditions are present and create an opportunity:

• Gold has been one of the most stable assets from a volatility perspective – both, during the pandemic, and during the subsequent rebound, giving additional credence to its role as a portfolio diversifier
• The at-the-money implied volatility of gold¹ has fallen considerably with its recent muted realised volatility², yet the ‘smile’ of the options strikes remains significant, with both out-of-the-money (OTM)³ calls and puts trading at higher premiums, versus at-the-money (ATM) options, suggesting investors anticipate extremes -- either very little or very significant gold price movement⁴ 
• Put volatility, particularly OTM volatility, remains elevated, suggesting investors are still positioned for downside exposure in gold, despite the recent rally 
• The term structure⁵ of gold options have steepened as shorter dated implied volatility has fallen
• Gold had an important technical breakout recently, and looks poised to test all-time highs, but could be overbought in the short-run.

Investor confidence in Germany recently jumped to a 21-year high, cheered by an acceleration of the domestic coronavirus vaccine programme and concomitant slowing of the domestic third wave of coronavirus. But while optimism for an economic upturn runs high, it brings with it growing fears of rising prices among inflation-wary German investors.

Google searches for ‘inflation’ in Germany – having been on an upward trend since October last year – surged in February after Eurozone annual headline CPI was reported to have jumped to an 11-month high of 0.9%, since when it has only accelerated.

And with comments from both domestic and European central bankers further fanning the flames of inflation expectations, gold has been very much on investors’ radars. Our Gold Demand Trends data shows that Germans bought more gold bars and coins in 2020 than in any previous year, by some margin. And so far in 2021, they have maintained a pace of investing that far outstrips the historical average, even when compared with the heady levels reached during, and in the aftermath of, the Global Financial Crisis.¹

Inflation expectations in Germany reached a 5-year high in March

ZEW monthly indicator of inflation expectations

Investment in gold Exchange Traded Products was similarly resilient in Q1. Compared with the sizable outflows from funds listed in the US or elsewhere in Europe, German funds registered only moderate losses, and have maintained steady – albeit small – inflows since early April. German ETPs now hold €18.4bn in AUM, second only to the UK in Europe and close to the July 2020 peak of €21.8bn.²

We know that German investors value gold as a means of protecting against inflation. In our extensive 2019 consumer research survey, 64% of German retail investors agreed that gold is a good safeguard against inflation/currency fluctuations and 61% felt that it would never lose its value over the long term.³

Almost half of the investors that owned gold bars or coins said that the main role of the investment was to protect their wealth. Real estate/property was similarly associated with wealth protection. But savings accounts were yet more likely to be seen as fulfilling this purpose – three in five investors said this was the main role of savings. While negative rates continue to plague Germany savers, investors may continue allocating their wealth to gold and property, rather than see it eroded.

German retail investors see wealth protection as key role of gold, savings and real estate

Almost 50% of respondents said gold bars and coins play this role in their portfolio

These findings are supported by the results of a study commissioned by Reisebank, which found that ‘value preservation’ and ‘protection against inflation’ were two of the key reasons cited by German investors for wanting to hold on to the gold investments they’ve made in the last two years.

But, rather than just ‘holding on to’ their current gold holdings, German investors have indicated that they are willing to buy more. Our most recent German survey, conducted in November last year, revealed that of those retail investors who had bought gold in the past, 40% said they were likely to buy more over the subsequent 12 months as a direct result of the coronavirus pandemic.⁴ Interestingly, that intention to invest was strongest among Gen Z and Millennial investors, which also tallies with Reisebank’s findings that more young adults (18-26 yrs) bought gold during the pandemic than older respondents (23% v 16%).

Whether or not escalating inflation in Germany is purely a temporary phenomenon, it seems unarguable that it is preying on investors’ minds. And that tends to go hand in hand with maintaining gold’s appeal. While 2020 set a very high bar that may prove challenging to repeat, German investment is likely to stay elevated for at least the remainder of this year.

This week I had the pleasure of joining Peter Kinsella of UBP for a podcast ‘Back to the gold fold’. We spoke about US real rates, gold demand trends in consumer and investment markets, the COMEX market dislocation and the slow improvement we are seeing there, and the differences between gold and cryptocurrencies.

Listen below!

As Basel III comes into force, we look at the impact of the Net Stable Funding Ratio (NSFR) on the gold market.

There has been much debate about the implications of Basel III on the bullion industry. What is clear is that the under the current rules the cost to banks of holding gold on balance sheet will increase – the NSFR requires 85% of required stable funding. This is punitive and does not acknowledge the highly liquid nature of gold, and the way gold is often transacted as a currency. The World Gold Council and London Bullion Market Association recently wrote¹ to the Prudential Regulatory Authority (PRA) setting out our concerns about the NSFR and the 85% Required Stable Funding (RSF) in particular:

• The current clearing and settlement system could be undermined – without an appropriate exemption, the increased costs may make participation in the clearing and settlement regime commercially unviable, potentially leading to some banks existing the system.
• Liquidity could be drained – the cost of taking on gold deposits as unallocated gold would increase compared to the cost of custody services for allocated gold. Unallocated gold is an essential source of liquidity for the effective functioning of the clearing and settlement system.
• Financing costs would increase – stable funding costs could be passed through to non-bank market participants such as miners, refiners and manufacturers using gold.
• Central bank operations would be curbed – the clearing banks facilitate gold deposit, lending and swaps operations; essential sources of market liquidity.

The joint LBMA-WGC letter can be found on the LBMA’s website here.

Impact on the London Clearing Regime and the Prudential Regulation Authority Interdependent Precious Metals Position 
Following this consultation, the Prudential Regulation Authority carved out an exemption for clearing members of the LPMCL. In the July 9th announcement clearing banks can apply for an exemption, which in turn will reduce the size of the capital buffer required. Under the interdependent precious metals permission, “firms would apply a 0% RSF factor to their unencumbered physical stock of precious metals, to the extent that it balances against customer deposits”. 
Whilst this is a welcome development as it will ensure the clearing regime in London can continue to operate, it still does not recognise the highly liquid nature of the gold market. We will continue our advocacy and research efforts to demonstrate gold’s fulfilment of HQLA criteria. 
 

The evolution of the Basel Accords

To understand how we got to an 85% RSF, we need to look at the evolution of the Basel Accords. The treatment of gold by regulators has evolved as the Basel Accords developed. The Basel Committee on Banking Supervision (BCBS) introduced the first iteration of the Basel Accords in the late 1980s to establish minimum capital requirements for banks. This was enforced by the “Group of Ten” economies – countries that agreed to participate in the IMF’s General Agreements to Borrow (GAB). Basel 1 was primarily focussed on credit risk, with bank assets grouped according to risk-weighting. Bullion carried a risk weigh of 0% and was therefore treated like cash. 

Basel II extended the focus to include a larger element of counterparty risk – additional capital was required to mitigate the risk a bank takes on due to its trading, investment or financing initiatives. Launched in 2004, bank assets were divided into three tiers depending on the perceived level of risk, with tier 1 assets deemed the least risky. Under these rules, national authorities had the discretion to treat gold as either tier 1 or tier 3. The BCBS stated that “at national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%.²” Under Basel II, a limiting ratio is placed on the amount of tier 3 capital that a bank can hold – tier III must not be more than 2.5x a bank’s tier 1 capital. 

Basel III and the NSFR

Basel III eliminates tier 3 capital and places new liquidity ratios on banks, specifically the Net Stable Funding Ratio (NSFR). This introduced an RSF factor of 85% for gold held on a bank’s balance sheet.  

NSFR and RSF definition under the current rules

The Net Stable Funding Ratio seeks to calculate the proportion of Available Stable Funding (ASF) via the liabilities over Required Stable Funding (RSF):

NSFR = Amount of available stable funding / amount of required stable funding

Another innovation was the Liquidity Coverage Ratio (LCR). The LCR promotes the short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets (HQLAs) to survive a significant stress scenario lasting for one month. It basically sets the minimum liquidity buffer to bridge liquidity mismatches for one month in a crisis scenario. The NSFR has a time horizon of one year and requires that banks maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities. Gold was not considered HQLA due to a lack of trading data at the time but it is our view that gold should be recognised as a very high quality liquid asset.  

Gold’s liquidity

The LBMA Trade Data³ gives an indication to the size of the London OTC market, the world’s largest financial market for gold. To complement this the WGC has commissioned a number of academic studies into the market liquidity of gold, most recently covering the disruptions triggered by the COVID-19 outbreak, and in all cases our analysis indicates that gold appears to exhibit the attributes and behaviour of well-established high quality liquid assets (HQLA) such as long-term US Treasuries.

Gold’s performance during COVID-19 has further demonstrated its extremely liquid nature.  World Gold Council data⁴ shows that gold is, on average, more liquid than many other major asset classes: 

Allocated vs. Unallocated Gold 

There has been much speculation about the impact of Basel III (including the NSFR) on the allocated and unallocated gold markets. Some commentators have noted that allocated gold can be considered a tier 1 asset and therefore receives a risk weighting of zero. This is nothing new. Gold held in own vaults or on an allocated basis has always been a tier 1 asset under the Basel Accords. This is because allocated gold attracts no credit risk – it is neither the asset or liability of the custodian bullion bank and is therefore not considered part of the custodian bank’s balance sheet.

So, whilst the Basel III Tier 1 capital rules do not materially change the treatment of allocated gold vs. unallocated gold, the NSFR will impact on-balance sheet gold. But does this mean the unallocated gold market in particular will disappear as some commentators are suggesting? No it won’t, but the costs of holding gold on balance sheet (regardless of whether it is allocated or not) will go up. Unallocated gold is an essential source of market liquidity. The clearing and settlement regime depends on it, and without an unallocated gold market it will be very difficult to finance (and facilitate) the upstream activities of gold producers and refiners, and the downstream users of gold such as jewellers and fabricators. The real economy demand for gold relies on the unallocated gold market. So whilst funding costs will increase, we are unlikely to see a major distortion in favour of allocated metal due to the imposition of the NSFR. 

Next steps

In the joint LBMA-WGC letter to the PRA a number of solutions were proposed including exempting the clearing and settlement regime from the NSFR. We are pleased that the PRA has since introduced the interdependent precious metals permission. This is in line with the Basel Accords and there is precedent for this – for example the Swiss regulators have proposed to treat precious metals assets resulting from precious metals loans as interdependent, and therefore exempt from the NSFR. 
However, this is not a complete solution as the exemptions are of a narrow scope and could be time limited. Gold is used as a currency in many gold lending and borrowing transactions, with interest denominated and paid in gold ounces. Matching maturities leads to a symmetry between the ASF and RSF. Acknowledging the use of gold as a currency in such transactions would mitigate the impact of the 85% RSF. 

Finally, we also believe the 2013 decision by the European Banking Authority (EBA) to not designate gold as HQLA should be revisited. Improvements in data and reporting since then has led to a compelling case for gold to be considered HQLA. Such a designation would provide more symmetry between the ASF and RSF, mitigating the impact of the NSFR whilst recognising the liquid nature of gold.

Gold is a safe harbour asset. Its lack of credit risk, its role as a risk mitigator, and its highly liquid nature means it can act as a financial system stabiliser. Anything that discourages banks from holding gold may increase the vulnerabilities of the financial system during liquidity crises.  

• Our short-term gold performance model enables investors to dissect monthly gold returns into key drivers of investment demand
• Different estimation windows provide additional insights on the varying influence of drivers over time
• During May, our model shows gold’s performance was only modestly impacted by rates but they still remain a relevant driver this year

Previously we highlighted a key insight from our short-term gold model that there was increased sensitivity to certain variables, such as interest rates, which was driving prices lower at the time. With rates remaining steady last month alongside gold’s robust rally of more than 7%,¹ investors may now be asking what other factors were influencing prices.

To answer this, we look again to our short-term gold performance model² to help analyse monthly or intra-month gold returns using drivers of investment demand over the short term, which complements our longer-term Gold Valuation Framework (GVF).³

But what is our short-term model and how can investors use it?

Our model uses monthly inputs for multiple variables that can be grouped within four key drivers of gold performance,⁴ employing statistics from 2007 onwards. Using multiple regression, we calculate sensitivities for each variable and the contribution they make to each month’s gold return. We normalise each variable by its respective Z-score every month, or the difference from its overall mean divided by standard deviation, which allows us to gauge the impact of variables on gold in a standardised measure.

The model uses the full 14-year period as its starting point,⁵ but we can also use the model to estimate the coefficients over shorter windows (for example, two or three years) to assess how these change over time. We can further enhance this shorter window analysis by using weekly inputs to attribute intra-month performance and examine sensitivity over the past year.⁶

The combination of these different methodologies can help assess which quantitative variables better explain gold’s performance. Additionally, the result can be complemented by a qualitative assessment and anecdotal evidence to create a comprehensive picture of gold’s behaviour over time.

Using May 2021 as a practical example…

Gold increased 7.5% m-o-m in May, closing near to US$1,900/oz.⁷ Our model indicates that almost 4% came from momentum, driven by positive flows into gold ETFs as well as an increase in futures net long positions. This was more than double the contribution made by the oft-discussed opportunity cost driver, which captures both currencies and interest rates.

While momentum in gold positioning and funds may have outperformed other drivers last month, on average this does not hold up over the full 14-year estimation period. Table 1 shows that movements in interest rates and inflation expectations, as expressed by the US 10-year breakeven inflation rate, have had the largest absolute impact on gold returns since 2007, while the variable tied to developed market (DM) currencies, for example, has proven less consequential over the long-term horizon.

Table 1: Interest rate and inflation measures have led individual gold drivers since 2007

Coefficients of explanatory gold variables ranked by magnitude*

However, gold’s price sensitivities to different variables can change based on the estimation window. Looking at just the last three years, using monthly inputs, we see that gold’s sensitivity to DM currencies increased nearly four-fold over the last three years compared to the full period since 2007, while its sensitivity to the breakeven inflation rate increased by nearly three-fold. On the other hand, the influence of the prior month’s gold return in explaining current month performance reduced dramatically, as in recent years gold has not shown the mean-reverting characteristic that it has exhibited historically (Table 2). The weekly model also shows that in the past year gold’s sensitivity to interest rates rose three-fold compared to the full period, on top of similar recent trends of heightened sensitivity to DM currencies and breakeven inflation rates as well as a reversal in the impact of prior gold returns (Table 3). Lastly, both models show that in recent years gold prices have moved positively when flows into equity funds outweighed flows into bond funds, which generally occurs when investors maintain higher risk tolerance in the market. This highlights the fact that gold does not rally exclusively during market downturns, but rather can exhibit growth in both risk-on and risk-off environments as indicated recently.

Table 2: The last three years have seen a jump in gold’s sensitivity to DM currencies and inflation expectations

Full period vs trailing 3-year variable coefficients based on monthly returns, in %*

Table 3: In the preceding 52 weeks interest rates have also had an outsized impact on gold

Full period vs trailing 1-year variable coefficients based on weekly returns, in %*

Finally, looking at the rolling window over time provides additional detail, particularly in variables whose coefficients change markedly in the shorter time horizon compared to the full period. For example, gold’s sensitivity to changes in interest rates appears to be higher when its sensitivity to inflation expectations is also higher, including at present (based on weekly returns over the last two years). Meanwhile, throughout almost the entire period since 2007, DM currencies have shown a negative relationship to gold prices (Chart 1). This speaks to the opportunity cost of holding gold, and the fact that gold’s sensitivity to rates tends to rise when the market is paying more attention to what central banks are doing, and this is often the case when inflation is uppermost in investors’ minds.

Chart 1: Gold’s sensitivity to interest rates and breakeven inflation is near record highs

Trailing 2-year gold betas*

Why this matters

The short-term gold performance model serves to provide insight into understanding gold returns over weeks and months, and it has been especially helpful recently as the dynamics of certain drivers have altered significantly. Moreover, adding iterations to the short-term model, such as shorter lookback windows, allows us to include detail that helps to explain gold’s performance in the current environment where the full period versions may be less perceptive. Furthermore, the model complements insights investors can draw from our Gold Valuation Framework. Utilising a combination of short-term models, with varying and sometimes rolling analysis periods, helps to minimise the extent of unattributed returns, and ultimately provides a clearer picture for investors on gold’s performance…even when prices swing.

Footnotes

¹Based on the LBMA Gold Price PM in USD as of 31 May 2021.

²For more information please see Short-Term Gold Price Drivers | What Affects Gold Prices | Goldhub.

³The Gold Valuation Framework (GVF) provides annual forecasts for gold performance in various macroeconomic scenarios based on the intersection of supply and demand. For more information please see Qaurum | A Valuation Model for Gold Relative to Macroeconomic Scenarios.

⁴The four broad sets of drivers of gold performance are Economic expansion, Risk and uncertainty, Opportunity cost, and Momentum. For more information please see Gold Outlook 2021 | Gold Market Outlook | World Gold Council.

⁵Model calculations start from 2007 due to data availability. Equity and bond flows data is not available until January 2007

⁶The weekly short-term model is not currently available on Goldhub but we expect it to be added over the coming months.

⁷Based on the LBMA Gold Price PM in USD as of 31 May 2021