Gold remains a key portfolio component in this environment
Following a remarkable performance year-to-date, the gold price fell by over 3% on 4 October, which we believe will likely result in physical buying.
The move seems to have been driven by speculation of a scaling back in the ECBs asset purchase programme, combined with rising expectations of a US rate hike in December. The fall triggered stop-losses and further tactical selling.
We believe that a shift in monetary policy need not signal lower gold prices. The price dip will likely result in physical demand from consumers, long term investors and central banks. In addition, the broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.