Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.
We believe that the recent volatility in the gold price was driven by massive liquidations across all assets and likely magnified by leveraged positions and rule-based trading.
Risk appetite amid high uncertainty
As we look ahead, we expect that the interplay between market risk and economic growth will drive gold demand in 2020
The global bullion banking industry is large and well-established with annual revenues estimated at more than US$1.5bn. The market includes both international banks and smaller local players.
Re-optimising portfolio structures for lower future expected bond returns suggests investors should consider an additional 1%-1.5% gold exposure in diversified portfolios.
The US Federal Reserve has cut rates twice in recent months and the market expects more of the same, as economic conditions become increasingly uncertain in the US and across the globe. Gold has already benefited from the shift in sentiment and Harry Tchilinguirian, head of commodity research at BNP Paribas, believes it will continue to do so.
In part two of this interview, First Eagle's Thomas Kertsos discusses gold’s role in detail and assesses the current drivers for performance.
The first half of 2019 proved quite eventful for financial markets. Stocks retraced their Q4 2018 losses by the end of April only to pullback again in May.
In Q4 2018, as global stock markets experienced their worst quarter since 2009, cryptocurrencies had a prime opportunity to demonstrate qualities associated with safe havens like gold. However, cryptocurrencies, such as bitcoin, behaved like risky assets and fell while gold rallied.