Precious metals are unique assets: they are scarce, albeit highly liquid. They not only have financial value, but they also have an emotional and cultural value attached to them. Investors range from individuals to pension funds and sovereign wealth funds, located in both, developed and emerging markets.
Gold: the most precious metal
“The modern gold market is a picture of diversity and growth. Since the early 1970s, the volume of gold produced each year has tripled, the amount of gold bought annually has quadrupled and gold markets have flourished across the globe” *.
Key facts that you should know:
● Gold is the main asset driven by many factors, not just by investment demand.
● Gold is one of the most effective diversifiers.
● Gold provides competitive returns compared to other important financial assets.
● Over time, fiduciary coins, including US dollars, tend to lose value compared to gold. Hence, the combination of these factors means that adding gold to a portfolio can improve risk-adjusted returns.
Demand for gold
Presently gold is being purchased by a cluster of consumers and investors that is much more diverse than at any given time in history.
Annual average gold demand: ~ 4.100 tons / ~ US$ 166 billion
The different uses of gold – jewellery, investments, technology, as the reserve of central banks – make different market sectors reach prominence at different times of the global economic cycle. This diversity of demand and the self-balanced nature of the gold market sustain the solid qualities of gold as an investment asset.
The price of gold
Undoubtedly, gold is a precious commodity in the stock market. In fact, there have been times when the price increased significantly, as occurred in the 1970s, a decade that began with a price of $ 35 per troy ounce which rose up to $ 850, i.e., over 2,300% in just 10 years.
Experts point out that we are presently living in a very similar environment to the one existing in the 1970s, in fact, the pattern of behaviour is very similar. Therefore, we are facing a positive outlook where experts, such as ETF Securities, suggest that inflation can take place whereas negative real interest rates are positive for gold.