Investment Commentary

The latest edition of our Investment Commentary examines golds performance year-to-date and explores relevant macroeconomic factors that can influence golds performance into Q4 2014.

In our view, there are four main reasons investors should view gold as a valuable portfolio component today:

• Positive economic growth is supportive of golds long-term demand
• Rising interest rates do not necessarily push gold prices down
• Golds cost effectiveness makes it an attractive portfolio hedge compared to other strategies
• Constraints in mine production and falling gold recycling have kept the market in balance.

Previous issues of Investment Commentary:

Gold Investor

This seventh edition of Gold Investor examines golds positive link to economic growth; explores its value as a hedge in times of duress; and discusses the impact that ETFs have had on the gold market.

This edition comprises:

The growth dividend: how rising GDP lifts gold consumer demand

Investors understand that in times of economic duress high-quality, liquid assets such as gold are in high demand. What is less understood is that the majority of gold demand is linked to consumption and long-term savings and not for speculative purposes. As an economy expands, incomes grow and gold demand increases counterbalancing short-term investment flows.

A practical hedge: less exotic, multipurpose, lower cost

We analyse and compare multiple investment vehicles commonly used as tail-risk hedges. Our research finds a compelling case for gold as a valuable hedge. It is cost-effective, easy to implementation, and has a wide range of applications even if its return during tail events is often lower than tailored (and often derivative-based) tail risk-mitigating strategies.

Ten years of gold ETFs: a wider and more efficient market

Gold-backed ETFs have become a US$70 billion dollar market with holders of all sizes and types spread across various geographies. Yet, the advent of ETFs has benefitted other gold investors as well: they have increased demand, democratised access, increased competition for new and existing gold vehicles, and contrary to popular belief they have responded to rather than driven gold volatility higher.