Research library

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.

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.

Central bank reserves are typically constructed according to three guiding principles: safety, liquidity and return. The Covid-19 pandemic has reinforced the significance of these principles and, by extension, the importance of smart and sustainable reserve management. 

The COVID pandemic and the ensuing economic lockdowns around the world have slashed global growth forecasts in 2020, but expectations of the speed of the economic recovery are quite varied. We analyse the potential performance of gold across four hypothetical scenarios provided by Oxford Economics.

The global COVID-19 pandemic fuelled safe-haven investment demand for gold, offsetting marked weakness in consumer-focused sectors of the market.

The benefits of certain portfolio hedges came into clear focus during the 2008-2009 financial crisis and did so again during the subsequent European sovereign debt crisis, the 2018 December stock market pullback and the most recent COVID-19 pandemic.

Gold plays a prominent role in reserve asset management, being one of the few assets that is universally permitted by the investment guidelines of the world’s central banks. This is in part due to the gold market being deep and liquid – a key requirement of reserve asset managers.