We take a special look at Gold in this December edition of Portfolio Perspectives.
Key Messages for Investors
- The macroeconomic environment muddles on.
- Gold can play a valuable role in a multi-asset portfolio given its distinct risk/return drivers and its ability to provide protection against geopolitical, inflation and growth risks.
- Gold’s meteoric rise has been predominantly supported by central bank buying, and more recently retail investors in the form of physical gold and ETF investments.
- We identify five demand drivers for gold which on balance are supportive for gold: central bank demand in particular is unlikely to be exhausted, especially among emerging markets with low gold reserve ratios.
- Despite exponential price gains, structural drivers such as US fiscal concerns, dollar status, and geopolitical risk remain, warranting a cautiously positive long-term view.