Navigating global uncertainty with gold
and otherCentral Bank purchases are the key drivers of gold prices. Demand in India has remained resilient despite higher prices. These two countries together account for approximately half of the global physical demand.
Global ETF (exchange-traded fund) holdings in gold are at a five-year low, and, despite rising prices, outflows continue and are unlikely to reverse until there is a considerable correction in risk assets like equities and credit, mirroring events in China. Hedge funds and momentum funds hold sizable positions in gold that may lead to near-term volatility due to profit taking. In addition to volatile situations in the Gulf region and eastern Europe (Ukraine, specifically), the world is also bracing for two major events that will have global repercussions as the world’s largest and richest democracies go to the polls.
India is no longer a “rounding-off" item in the global financial markets, and the election outcome could impact the overall sentiment towards emerging markets. A second term as US president for Donald Trump is not what the struggling Chinese economy needs, as it could increase the probability of a depreciation in the yuan. A widespread tariff war could lead to currency market volatility, which could be conducive to gold.
The good news is that, according to the United Nations, World Health Organization and Organisation for Economic Co-operation and Development, the world is becoming a better place to live in with each passing year. However, do ‘black swan’ economic and geopolitical events no longer matter? Has humankind conquered the ups and downs of economic and market cycles? If you’re unsure, you might not want to put all your eggs in one basket. Consider a multi-asset approach to
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