Strengthening consumer demand mitigated the impact of ETF outflows as global economies continued to recover
After a strong 2020 performance where the price rallied 25% in US dollar terms in an environment where rates fell, gold has been much weaker during 2021, down 5% year-to-date with rising rates.
A sharp rise in US interest rates and a stronger dollar have weighed on gold recently. But a rebound in economic activity and a lower gold price have provided opportunities for consumers and strategic investors alike.
Weak Q4 set the seal on an 11-year low for annual 2020 gold demand
The COVID-19 pandemic raised uncertainty by both compounding existing risks while creating new ones. But by the end of last year, investors were optimistic that the worst was over.
Gold-backed exchange-traded funds and similar products (gold ETFs) have flourished since their introduction in 2003, attracting both institutional and retail investors across the globe. Recently, gold has become globally accepted as a strategic asset amidst a high-risk and low-rate environment spurring investment demand and the expansion of the gold-ETF market.
Strong growth in global investment demand for gold in Q3 partly offset weakness elsewhere as COVID-19 remained in the driving seat.
Record H1 inflows into gold-backed ETFs offset weakness in all other sectors of the market, with demand hit by the ongoing global coronavirus pandemic.
Our new gold market outlook examines how the combination of high risk, low opportunity cost and positive price momentum looks set to support gold investment and offset weakness in consumption from an economic contraction.
Gold is a clear complement to stocks, bonds and alternative assets for well-balanced US investor portfolios. As a store of wealth and a multi-faceted hedge, gold has outperformed many major asset classes while providing robust performance in both rising and falling markets.