Here is a summary of the key points presented:
- Negative real interest rates around the world will provide a highly supportive environment for gold over the coming years.
- Investors have largely missed the up move since March, and only recently began to increase long gold futures positions.
- The options market shows that investors anticipate substantial gold upside over the coming years, judging by the high price of low-delta longer-dated XAU calls.
- The key characteristics of gold – long-term returns, liquidity, and diversification – help to support the argument that almost all portfolios will benefit from an allocation to gold.
- Gold is currently a tale of two markets. Whilst investor interest in gold has increased significantly in 2020 so far, consumer demand has fallen sharply. An important area to monitor is how global consumer demand recovers.
- The level of risk and uncertainty ahead, coupled with a backdrop of low interest rates and decreasing bond yields, should continue to provide support for further gold investment demand.
Norman Villamin
CIO Wealth Management
Peter Kinsella
Global Head of Forex Strategy