The progressive aging of the Spanish population, due to the increase in life expectancy and the reduction in the mortality rate, is going to make the future of pensions increasingly complicated.
At this rate, in a few years, there will be more retired Spaniards than active workers, which seriously compromises the functioning of the public pension system.
For this reason, experts believe that it is necessary to complement this system with an investment in physical gold, an ideal formula to ensure a peaceful retirement with the same purchasing power that one had while active.
It is necessary to be aware of the need to complement public pensions with other assets that allow enjoying a peaceful retirement. And investment gold is the perfect complement to the public pension system.
The Pension Piggy Bank
The situation of the so-called Social Security Reserve Fund, popularly known as the “pension piggy bank”, is very delicate.
The Government contemplated in the 2019 Budget the granting of credit by the State, in the amount of 15,164 million euros, which would allow it to face the pending payments to retirees between now and the end of the year.
However, these Budgets were not approved and those of 2018 had to be extended, which means that the credit granted by the State would be the same amount requested the previous year by the Government: 13,830 million euros.
An amount that will force the Socialist Executive to practically exhaust the Social Security Reserve Fund, in which there will be barely 16 million euros left, after making the 2019 payments, of the almost 67,000 million that it had in 2011.
National Pension System
In addition to dealing with this immediate need for liquidity to pay pensions, the Social Security data do not allow very optimistic forecasts to be made for the coming years, since the increase in spending on pensions is advancing at a much higher rate than the collection of the system, which causes the deficit to continue to rise, creating a real “hole” in the public accounts.
This situation of the public pension system has long been used by insurance companies as an argument to “sell” their private pension plans. The former Prime Minister himself commented at the beginning of 2018:
“Public powers must encourage long-term savings, which serve as a complement to the public pension.”
Play Video
As recalled, pension plans have existed for 30 years and have a customer base of more than eight million people, with total accumulated savings of more than 100,000 million euros.
Gold is the perfect complement to pensions
This is nothing new since in neighboring countries, such as Italy, France, or Germany, it is very common for citizens to save by buying small pieces of gold, ingots, or coins, which will become the formula to guarantee that when retirement comes they will continue to maintain the same purchasing power.
Without a doubt, this is an example that citizens should follow if they want to face the future calmly.
This is precisely the objective to ensure that they complement the income from Social Security with that extra money that will allow them to maintain purchasing power and the level of life they had before retiring.
The progressive aging of the Spanish population, due to the increase in life expectancy and the reduction in the mortality rate, is going to make the future of pensions increasingly complicated.
At this rate, in a few years, there will be more retired Spaniards than active workers, which seriously compromises the functioning of the public pension system.
For this reason, experts believe that it is necessary to complement this system with an investment in physical gold, an ideal formula to ensure a peaceful retirement with the same purchasing power that one had while active.
It is necessary to be aware of the need to complement public pensions with other assets that allow enjoying a peaceful retirement. And investment gold is the perfect complement to the public pension system.
The Pension Piggy Bank
The situation of the so-called Social Security Reserve Fund, popularly known as the “pension piggy bank”, is very delicate.
The Government contemplated in the 2019 Budget the granting of credit by the State, in the amount of 15,164 million euros, which would allow it to face the pending payments to retirees between now and the end of the year.
However, these Budgets were not approved and those of 2018 had to be extended, which means that the credit granted by the State would be the same amount requested the previous year by the Government: 13,830 million euros.
An amount that will force the Socialist Executive to practically exhaust the Social Security Reserve Fund, in which there will be barely 16 million euros left, after making the 2019 payments, of the almost 67,000 million that it had in 2011.
National Pension System
In addition to dealing with this immediate need for liquidity to pay pensions, the Social Security data do not allow very optimistic forecasts to be made for the coming years, since the increase in spending on pensions is advancing at a much higher rate than the collection of the system, which causes the deficit to continue to rise, creating a real “hole” in the public accounts.
This situation of the public pension system has long been used by insurance companies as an argument to “sell” their private pension plans. The former Prime Minister himself commented at the beginning of 2018:
“Public powers must encourage long-term savings, which serve as a complement to the public pension.”
Play Video
As recalled, pension plans have existed for 30 years and have a customer base of more than eight million people, with total accumulated savings of more than 100,000 million euros.
Gold is the perfect complement to pensions
This is nothing new since in neighboring countries, such as Italy, France, or Germany, it is very common for citizens to save by buying small pieces of gold, ingots, or coins, which will become the formula to guarantee that when retirement comes they will continue to maintain the same purchasing power.
Without a doubt, this is an example that citizens should follow if they want to face the future calmly.
This is precisely the objective to ensure that they complement the income from Social Security with that extra money that will allow them to maintain purchasing power and the level of life they had before retiring.
The progressive aging of the Spanish population, due to the increase in life expectancy and the reduction in the mortality rate, is going to make the future of pensions increasingly complicated.
At this rate, in a few years, there will be more retired Spaniards than active workers, which seriously compromises the functioning of the public pension system.
For this reason, experts believe that it is necessary to complement this system with an investment in physical gold, an ideal formula to ensure a peaceful retirement with the same purchasing power that one had while active.
It is necessary to be aware of the need to complement public pensions with other assets that allow enjoying a peaceful retirement. And investment gold is the perfect complement to the public pension system.
The Pension Piggy Bank
The situation of the so-called Social Security Reserve Fund, popularly known as the “pension piggy bank”, is very delicate.
The Government contemplated in the 2019 Budget the granting of credit by the State, in the amount of 15,164 million euros, which would allow it to face the pending payments to retirees between now and the end of the year.
However, these Budgets were not approved and those of 2018 had to be extended, which means that the credit granted by the State would be the same amount requested the previous year by the Government: 13,830 million euros.
An amount that will force the Socialist Executive to practically exhaust the Social Security Reserve Fund, in which there will be barely 16 million euros left, after making the 2019 payments, of the almost 67,000 million that it had in 2011.
National Pension System
In addition to dealing with this immediate need for liquidity to pay pensions, the Social Security data do not allow very optimistic forecasts to be made for the coming years, since the increase in spending on pensions is advancing at a much higher rate than the collection of the system, which causes the deficit to continue to rise, creating a real “hole” in the public accounts.
This situation of the public pension system has long been used by insurance companies as an argument to “sell” their private pension plans. The former Prime Minister himself commented at the beginning of 2018:
“Public powers must encourage long-term savings, which serve as a complement to the public pension.”
Play Video
As recalled, pension plans have existed for 30 years and have a customer base of more than eight million people, with total accumulated savings of more than 100,000 million euros.
Gold is the perfect complement to pensions
This is nothing new since in neighboring countries, such as Italy, France, or Germany, it is very common for citizens to save by buying small pieces of gold, ingots, or coins, which will become the formula to guarantee that when retirement comes they will continue to maintain the same purchasing power.
Without a doubt, this is an example that citizens should follow if they want to face the future calmly.
This is precisely the objective to ensure that they complement the income from Social Security with that extra money that will allow them to maintain purchasing power and the level of life they had before retiring.
The progressive aging of the Spanish population, due to the increase in life expectancy and the reduction in the mortality rate, is going to make the future of pensions increasingly complicated.
At this rate, in a few years, there will be more retired Spaniards than active workers, which seriously compromises the functioning of the public pension system.
For this reason, experts believe that it is necessary to complement this system with an investment in physical gold, an ideal formula to ensure a peaceful retirement with the same purchasing power that one had while active.
It is necessary to be aware of the need to complement public pensions with other assets that allow enjoying a peaceful retirement. And investment gold is the perfect complement to the public pension system.
The Pension Piggy Bank
The situation of the so-called Social Security Reserve Fund, popularly known as the “pension piggy bank”, is very delicate.
The Government contemplated in the 2019 Budget the granting of credit by the State, in the amount of 15,164 million euros, which would allow it to face the pending payments to retirees between now and the end of the year.
However, these Budgets were not approved and those of 2018 had to be extended, which means that the credit granted by the State would be the same amount requested the previous year by the Government: 13,830 million euros.
An amount that will force the Socialist Executive to practically exhaust the Social Security Reserve Fund, in which there will be barely 16 million euros left, after making the 2019 payments, of the almost 67,000 million that it had in 2011.
National Pension System
In addition to dealing with this immediate need for liquidity to pay pensions, the Social Security data do not allow very optimistic forecasts to be made for the coming years, since the increase in spending on pensions is advancing at a much higher rate than the collection of the system, which causes the deficit to continue to rise, creating a real “hole” in the public accounts.
This situation of the public pension system has long been used by insurance companies as an argument to “sell” their private pension plans. The former Prime Minister himself commented at the beginning of 2018:
“Public powers must encourage long-term savings, which serve as a complement to the public pension.”
Play Video
As recalled, pension plans have existed for 30 years and have a customer base of more than eight million people, with total accumulated savings of more than 100,000 million euros.
Gold is the perfect complement to pensions
This is nothing new since in neighboring countries, such as Italy, France, or Germany, it is very common for citizens to save by buying small pieces of gold, ingots, or coins, which will become the formula to guarantee that when retirement comes they will continue to maintain the same purchasing power.
Without a doubt, this is an example that citizens should follow if they want to face the future calmly.
This is precisely the objective to ensure that they complement the income from Social Security with that extra money that will allow them to maintain purchasing power and the level of life they had before retiring.
)
[1] => Array
(
[title] => Gold, Is The Best Investment Asset In Case Stagflation Breaks Out
[link] => https://companyira.gold/gold-is-the-best-investment-asset-in-case-stagflation-breaks-out/
[dc] => Array
(
[creator] => Richard Gonzalez
)
[pubdate] => Wed, 16 Nov 2022 13:25:25 +0000
[category] => Gold Investment
[guid] => https://companyira.gold/?p=107
[description] =>
The current economic situation could lead to a stagflation scenario, characterized by high inflation and a recession in economic growth. The risk is greater in Europe than in the United States, due to its more delicate economic position and the rise in prices of raw materials. In this scenario, the price of gold could skyrocket, since it is an asset that protects against risk and diversifies the investment portfolio.
In a report published these days, analysts from the World Gold Council Johan Palmberg and KrishanGopaul assess the impact that a stagflation situation like the one recorded in the 1970s would have on the gold market, characterized by low economic growth, high inflation, and high unemployment.
According to the report, the European Central Bank discussed, during its last meeting, the possibility of a ‘stagflation shock’ in the Eurozone, although not a direct stagflation situation.
The situation is more complicated in Europe than in the United States, due to the threat of the Ukraine war, which has worsened a situation marked by the slowdown in the growth of the money supply, and the reduction of confidence and business activity.
The war has also caused a notable increase in the price of such essential supplies as natural gas.
By contrast, in the United States, the situation is different: although inflation is at its highest point in half a century, economic data is still in expansionary territory. However, analysts at the World Gold Council noted that an environment of stagflation is taking place, with indicators pointing to a risk of slower growth and higher prices.
The Role Of Gold
In stagflationary economic environments, gold is the asset that tends to appreciate the most, while those with the highest risk are those that suffer the most pronounced falls.
Thus, in the four economic cycles that have occurred since 1973 (prosperity, reflation, stagflation, deflation), gold is the asset that has registered the highest average annual revaluation, with 54.7%.
As can be seen in the following table, the precious metal is the best asset in times of stagflation, with a huge difference compared to the rest (+32.2%).
According to the World Gold Council report, the consistent revaluation of the price of the metal so far this year is consistent with its historical evolution in stagflation environments, at first behind commodities and then surpassing them.
“Regardless of the motivation for the current general interest in gold, it is doing exactly what an element of diversification and defense of the investment portfolio should do: offer protection when the rest of the assets are falling ”, stress the analysts.
In this case, gold is also benefiting from the subdued performance in bonds: the US Treasury bond index has fallen 6% year-to-date and even the invasion of Ukraine has barely made a difference. slight ascent before resuming the descending path.
“If growth slows significantly and stagflation materializes, history suggests bonds should soar and yields fall,” the report said.
In conclusion, the World Council analysts highlight that gold has important favorable factors at the moment: weak stock markets, geopolitical risk, and skyrocketing inflation.
“Should the current situation morph into a more stagflationaryenvironment , increasing risk, history suggests that the situation could be even better for gold , ” the report concludes.…
The current economic situation could lead to a stagflation scenario, characterized by high inflation and a recession in economic growth. The risk is greater in Europe than in the United States, due to its more delicate economic position and the rise in prices of raw materials. In this scenario, the price of gold could skyrocket, since it is an asset that protects against risk and diversifies the investment portfolio.
In a report published these days, analysts from the World Gold Council Johan Palmberg and KrishanGopaul assess the impact that a stagflation situation like the one recorded in the 1970s would have on the gold market, characterized by low economic growth, high inflation, and high unemployment.
According to the report, the European Central Bank discussed, during its last meeting, the possibility of a ‘stagflation shock’ in the Eurozone, although not a direct stagflation situation.
The situation is more complicated in Europe than in the United States, due to the threat of the Ukraine war, which has worsened a situation marked by the slowdown in the growth of the money supply, and the reduction of confidence and business activity.
The war has also caused a notable increase in the price of such essential supplies as natural gas.
By contrast, in the United States, the situation is different: although inflation is at its highest point in half a century, economic data is still in expansionary territory. However, analysts at the World Gold Council noted that an environment of stagflation is taking place, with indicators pointing to a risk of slower growth and higher prices.
The Role Of Gold
In stagflationary economic environments, gold is the asset that tends to appreciate the most, while those with the highest risk are those that suffer the most pronounced falls.
Thus, in the four economic cycles that have occurred since 1973 (prosperity, reflation, stagflation, deflation), gold is the asset that has registered the highest average annual revaluation, with 54.7%.
As can be seen in the following table, the precious metal is the best asset in times of stagflation, with a huge difference compared to the rest (+32.2%).
According to the World Gold Council report, the consistent revaluation of the price of the metal so far this year is consistent with its historical evolution in stagflation environments, at first behind commodities and then surpassing them.
“Regardless of the motivation for the current general interest in gold, it is doing exactly what an element of diversification and defense of the investment portfolio should do: offer protection when the rest of the assets are falling ”, stress the analysts.
In this case, gold is also benefiting from the subdued performance in bonds: the US Treasury bond index has fallen 6% year-to-date and even the invasion of Ukraine has barely made a difference. slight ascent before resuming the descending path.
“If growth slows significantly and stagflation materializes, history suggests bonds should soar and yields fall,” the report said.
In conclusion, the World Council analysts highlight that gold has important favorable factors at the moment: weak stock markets, geopolitical risk, and skyrocketing inflation.
“Should the current situation morph into a more stagflationaryenvironment , increasing risk, history suggests that the situation could be even better for gold , ” the report concludes.…
The current economic situation could lead to a stagflation scenario, characterized by high inflation and a recession in economic growth. The risk is greater in Europe than in the United States, due to its more delicate economic position and the rise in prices of raw materials. In this scenario, the price of gold could skyrocket, since it is an asset that protects against risk and diversifies the investment portfolio.
In a report published these days, analysts from the World Gold Council Johan Palmberg and KrishanGopaul assess the impact that a stagflation situation like the one recorded in the 1970s would have on the gold market, characterized by low economic growth, high inflation, and high unemployment.
According to the report, the European Central Bank discussed, during its last meeting, the possibility of a ‘stagflation shock’ in the Eurozone, although not a direct stagflation situation.
The situation is more complicated in Europe than in the United States, due to the threat of the Ukraine war, which has worsened a situation marked by the slowdown in the growth of the money supply, and the reduction of confidence and business activity.
The war has also caused a notable increase in the price of such essential supplies as natural gas.
By contrast, in the United States, the situation is different: although inflation is at its highest point in half a century, economic data is still in expansionary territory. However, analysts at the World Gold Council noted that an environment of stagflation is taking place, with indicators pointing to a risk of slower growth and higher prices.
The Role Of Gold
In stagflationary economic environments, gold is the asset that tends to appreciate the most, while those with the highest risk are those that suffer the most pronounced falls.
Thus, in the four economic cycles that have occurred since 1973 (prosperity, reflation, stagflation, deflation), gold is the asset that has registered the highest average annual revaluation, with 54.7%.
As can be seen in the following table, the precious metal is the best asset in times of stagflation, with a huge difference compared to the rest (+32.2%).
According to the World Gold Council report, the consistent revaluation of the price of the metal so far this year is consistent with its historical evolution in stagflation environments, at first behind commodities and then surpassing them.
“Regardless of the motivation for the current general interest in gold, it is doing exactly what an element of diversification and defense of the investment portfolio should do: offer protection when the rest of the assets are falling ”, stress the analysts.
In this case, gold is also benefiting from the subdued performance in bonds: the US Treasury bond index has fallen 6% year-to-date and even the invasion of Ukraine has barely made a difference. slight ascent before resuming the descending path.
“If growth slows significantly and stagflation materializes, history suggests bonds should soar and yields fall,” the report said.
In conclusion, the World Council analysts highlight that gold has important favorable factors at the moment: weak stock markets, geopolitical risk, and skyrocketing inflation.
“Should the current situation morph into a more stagflationaryenvironment , increasing risk, history suggests that the situation could be even better for gold , ” the report concludes.…
The current economic situation could lead to a stagflation scenario, characterized by high inflation and a recession in economic growth. The risk is greater in Europe than in the United States, due to its more delicate economic position and the rise in prices of raw materials. In this scenario, the price of gold could skyrocket, since it is an asset that protects against risk and diversifies the investment portfolio.
In a report published these days, analysts from the World Gold Council Johan Palmberg and KrishanGopaul assess the impact that a stagflation situation like the one recorded in the 1970s would have on the gold market, characterized by low economic growth, high inflation, and high unemployment.
According to the report, the European Central Bank discussed, during its last meeting, the possibility of a ‘stagflation shock’ in the Eurozone, although not a direct stagflation situation.
The situation is more complicated in Europe than in the United States, due to the threat of the Ukraine war, which has worsened a situation marked by the slowdown in the growth of the money supply, and the reduction of confidence and business activity.
The war has also caused a notable increase in the price of such essential supplies as natural gas.
By contrast, in the United States, the situation is different: although inflation is at its highest point in half a century, economic data is still in expansionary territory. However, analysts at the World Gold Council noted that an environment of stagflation is taking place, with indicators pointing to a risk of slower growth and higher prices.
The Role Of Gold
In stagflationary economic environments, gold is the asset that tends to appreciate the most, while those with the highest risk are those that suffer the most pronounced falls.
Thus, in the four economic cycles that have occurred since 1973 (prosperity, reflation, stagflation, deflation), gold is the asset that has registered the highest average annual revaluation, with 54.7%.
As can be seen in the following table, the precious metal is the best asset in times of stagflation, with a huge difference compared to the rest (+32.2%).
According to the World Gold Council report, the consistent revaluation of the price of the metal so far this year is consistent with its historical evolution in stagflation environments, at first behind commodities and then surpassing them.
“Regardless of the motivation for the current general interest in gold, it is doing exactly what an element of diversification and defense of the investment portfolio should do: offer protection when the rest of the assets are falling ”, stress the analysts.
In this case, gold is also benefiting from the subdued performance in bonds: the US Treasury bond index has fallen 6% year-to-date and even the invasion of Ukraine has barely made a difference. slight ascent before resuming the descending path.
“If growth slows significantly and stagflation materializes, history suggests bonds should soar and yields fall,” the report said.
In conclusion, the World Council analysts highlight that gold has important favorable factors at the moment: weak stock markets, geopolitical risk, and skyrocketing inflation.
“Should the current situation morph into a more stagflationaryenvironment , increasing risk, history suggests that the situation could be even better for gold , ” the report concludes.…
)
[2] => Array
(
[title] => The Rise In Interest Rates, Is A Key Factor For Gold To Reach Its Maximum Price
[link] => https://companyira.gold/the-rise-in-interest-rates-is-a-key-factor-for-gold-to-reach-its-maximum-price/
[dc] => Array
(
[creator] => Richard Gonzalez
)
[pubdate] => Tue, 15 Nov 2022 14:57:35 +0000
[category] => Gold Prices
[guid] => https://companyira.gold/?p=24
[description] =>
The price of gold has skyrocketed in recent weeks, with the war in Ukraine as the main catalyst. Geopolitical instability has sparked fear among investors, who are ditching risky assets and moving closer to gold, driving its price close to an all-time high. However, there are other factors that could be even more decisive, such as the start of the interest rate hike cycle in the United States.
In the latest report published by the Australian Perth Mint, it’s head of research, Jordan Eliseo, underlines that this rise in the price of gold in recent weeks, coinciding with the invasion of Ukraine by Russia, has returned the precious metal to the level of $2,000 an ounce (A$2,800 an ounce).
This rise occurs after a correction period of about 15 months, in which gold has fallen about 15% between August 2020 and January 2022. Among the factors that have caused this correction, the Western Australian Mint analyst highlights the following:
The rise in the price of the dollar by 6% during the year 2021.
Greater-than-expected growth in the global economy.
The extraordinary rise of capital markets, with the S&P 500 registering growth of more than 25% in 2021.
The strengthening of the price of cryptocurrencies during the past year, with bitcoin approaching the barrier of 000 dollars a unit.
All these factors not specific to the precious metals market caused the price of gold to undergo a correction, after having risen approximately 70%, from less than $1,200 to about $2,050 an ounce between the end of 2018 and 2020.
Despite the fact that most analyzes attribute the recovery in the price of gold to the crisis between Russia and Ukraine, a new factor recently introduced into the equation may be decisive for the future of the precious metal: the rise in interest rates for part of the US Federal Reserve.
As Jordan Eliseo’s analysis points out, “in theory, the price of gold should fall in 2022, due to the coincidence of unfavorable factors such as the rise in interest rates and the conclusion of several of the quantitative easing programs that banks plants had put in place to support their economies during the pandemic.
In theory, gold offers no returns; Therefore, if the interest rates that one can receive for depositing their money in a bank account or in a time deposit rise, the so-called opportunity cost of owning gold would rise, which should be negative for the price of the metal.
But as Eliseo points out, in reality during the last 50 years it has been shown on many occasions that the price of gold tends to rise when interest rates rise. Apart from the situation in the mid-80s of the 20th century, when the price of gold fell by 10%, and from a slight decrease between 1993 and 1995, the price of gold has risen, sometimes considerably, in periods when the Federal Reserve has raised interest rates.
Thus, in the cycle of rate hikes that took place between January 1972 and July 1974, the price of gold went from $47.60 to $157.30 an ounce (+230.5%).
Between January 1977 and January 1981, gold went from being worth $131.30 to $506.50 an ounce (+285.8%).
Between May 2004 and September 2006, the price of gold went from $393.80 to $597.80 an ounce (+51.8%).
Finally, between December 2015 and July 2019, gold went from being worth $1,060.91 an ounce to $1,413.55 (+33.2%).
The average increase in the price of gold during the six cycles of interest rate hikes by the Fed between 1972 and 2019 is almost 100%.
“These data clearly underscore that higher interest rates by themselves are not necessarily detrimental to the price of gold . Movements in the capital market and the value of the US dollar, in addition to the conditions of the economy in general, influence the demand and, therefore, the price of the precious metal, “ says the Perth Mint report.
Inflation
Another factor that will influence the evolution of the price of gold throughout 2022 is inflation. According to the report, gold does not always rise when the inflation rate is growing. However, its track record shows that it is one of the best assets in terms of protection against rising consumer price indices.
Data from the Perth Mint reveals that the price of gold in Australian dollars has grown by an average of 20% in nominal terms during years when inflation in Australia was equal to or greater than 3%.
What makes inflation expectations so relevant to gold price developments is that the market currently expects the inflation rate to fall rapidly and remain low for the next decade.
This expectation can be visualized with the following data: when the CPI rate reached 7% in the United States in December 2021, the ten-year core inflation rate, that is, what the market expects inflation to register in the next decade, barely reached 2.56%.
This difference is the largest in the last 20 years between the current CPI rate and ten-year core inflation. According to the Perth Mint analysis, the only time a similar difference has been recorded was in 2008, and then it was barely 3%.
At that time, as now, gold had gone through a period of correction during which it had fallen by approximately 20%. That period was short-lived and ended with an explosive rise of more than 150% in the following three years.
As the report points out, “given this trajectory and the fact that there is room for the CPI rise to slow even if it continues to exceed market expectations, there are many reasons to believe that the current inflation dynamics will cause the CPI to rise. gold price over the next few years, regardless of what happens to interest rates.…
The price of gold has skyrocketed in recent weeks, with the war in Ukraine as the main catalyst. Geopolitical instability has sparked fear among investors, who are ditching risky assets and moving closer to gold, driving its price close to an all-time high. However, there are other factors that could be even more decisive, such as the start of the interest rate hike cycle in the United States.
In the latest report published by the Australian Perth Mint, it’s head of research, Jordan Eliseo, underlines that this rise in the price of gold in recent weeks, coinciding with the invasion of Ukraine by Russia, has returned the precious metal to the level of $2,000 an ounce (A$2,800 an ounce).
This rise occurs after a correction period of about 15 months, in which gold has fallen about 15% between August 2020 and January 2022. Among the factors that have caused this correction, the Western Australian Mint analyst highlights the following:
The rise in the price of the dollar by 6% during the year 2021.
Greater-than-expected growth in the global economy.
The extraordinary rise of capital markets, with the S&P 500 registering growth of more than 25% in 2021.
The strengthening of the price of cryptocurrencies during the past year, with bitcoin approaching the barrier of 000 dollars a unit.
All these factors not specific to the precious metals market caused the price of gold to undergo a correction, after having risen approximately 70%, from less than $1,200 to about $2,050 an ounce between the end of 2018 and 2020.
Despite the fact that most analyzes attribute the recovery in the price of gold to the crisis between Russia and Ukraine, a new factor recently introduced into the equation may be decisive for the future of the precious metal: the rise in interest rates for part of the US Federal Reserve.
As Jordan Eliseo’s analysis points out, “in theory, the price of gold should fall in 2022, due to the coincidence of unfavorable factors such as the rise in interest rates and the conclusion of several of the quantitative easing programs that banks plants had put in place to support their economies during the pandemic.
In theory, gold offers no returns; Therefore, if the interest rates that one can receive for depositing their money in a bank account or in a time deposit rise, the so-called opportunity cost of owning gold would rise, which should be negative for the price of the metal.
But as Eliseo points out, in reality during the last 50 years it has been shown on many occasions that the price of gold tends to rise when interest rates rise. Apart from the situation in the mid-80s of the 20th century, when the price of gold fell by 10%, and from a slight decrease between 1993 and 1995, the price of gold has risen, sometimes considerably, in periods when the Federal Reserve has raised interest rates.
Thus, in the cycle of rate hikes that took place between January 1972 and July 1974, the price of gold went from $47.60 to $157.30 an ounce (+230.5%).
Between January 1977 and January 1981, gold went from being worth $131.30 to $506.50 an ounce (+285.8%).
Between May 2004 and September 2006, the price of gold went from $393.80 to $597.80 an ounce (+51.8%).
Finally, between December 2015 and July 2019, gold went from being worth $1,060.91 an ounce to $1,413.55 (+33.2%).
The average increase in the price of gold during the six cycles of interest rate hikes by the Fed between 1972 and 2019 is almost 100%.
“These data clearly underscore that higher interest rates by themselves are not necessarily detrimental to the price of gold . Movements in the capital market and the value of the US dollar, in addition to the conditions of the economy in general, influence the demand and, therefore, the price of the precious metal, “ says the Perth Mint report.
Inflation
Another factor that will influence the evolution of the price of gold throughout 2022 is inflation. According to the report, gold does not always rise when the inflation rate is growing. However, its track record shows that it is one of the best assets in terms of protection against rising consumer price indices.
Data from the Perth Mint reveals that the price of gold in Australian dollars has grown by an average of 20% in nominal terms during years when inflation in Australia was equal to or greater than 3%.
What makes inflation expectations so relevant to gold price developments is that the market currently expects the inflation rate to fall rapidly and remain low for the next decade.
This expectation can be visualized with the following data: when the CPI rate reached 7% in the United States in December 2021, the ten-year core inflation rate, that is, what the market expects inflation to register in the next decade, barely reached 2.56%.
This difference is the largest in the last 20 years between the current CPI rate and ten-year core inflation. According to the Perth Mint analysis, the only time a similar difference has been recorded was in 2008, and then it was barely 3%.
At that time, as now, gold had gone through a period of correction during which it had fallen by approximately 20%. That period was short-lived and ended with an explosive rise of more than 150% in the following three years.
As the report points out, “given this trajectory and the fact that there is room for the CPI rise to slow even if it continues to exceed market expectations, there are many reasons to believe that the current inflation dynamics will cause the CPI to rise. gold price over the next few years, regardless of what happens to interest rates.…
The price of gold has skyrocketed in recent weeks, with the war in Ukraine as the main catalyst. Geopolitical instability has sparked fear among investors, who are ditching risky assets and moving closer to gold, driving its price close to an all-time high. However, there are other factors that could be even more decisive, such as the start of the interest rate hike cycle in the United States.
In the latest report published by the Australian Perth Mint, it’s head of research, Jordan Eliseo, underlines that this rise in the price of gold in recent weeks, coinciding with the invasion of Ukraine by Russia, has returned the precious metal to the level of $2,000 an ounce (A$2,800 an ounce).
This rise occurs after a correction period of about 15 months, in which gold has fallen about 15% between August 2020 and January 2022. Among the factors that have caused this correction, the Western Australian Mint analyst highlights the following:
The rise in the price of the dollar by 6% during the year 2021.
Greater-than-expected growth in the global economy.
The extraordinary rise of capital markets, with the S&P 500 registering growth of more than 25% in 2021.
The strengthening of the price of cryptocurrencies during the past year, with bitcoin approaching the barrier of 000 dollars a unit.
All these factors not specific to the precious metals market caused the price of gold to undergo a correction, after having risen approximately 70%, from less than $1,200 to about $2,050 an ounce between the end of 2018 and 2020.
Despite the fact that most analyzes attribute the recovery in the price of gold to the crisis between Russia and Ukraine, a new factor recently introduced into the equation may be decisive for the future of the precious metal: the rise in interest rates for part of the US Federal Reserve.
As Jordan Eliseo’s analysis points out, “in theory, the price of gold should fall in 2022, due to the coincidence of unfavorable factors such as the rise in interest rates and the conclusion of several of the quantitative easing programs that banks plants had put in place to support their economies during the pandemic.
In theory, gold offers no returns; Therefore, if the interest rates that one can receive for depositing their money in a bank account or in a time deposit rise, the so-called opportunity cost of owning gold would rise, which should be negative for the price of the metal.
But as Eliseo points out, in reality during the last 50 years it has been shown on many occasions that the price of gold tends to rise when interest rates rise. Apart from the situation in the mid-80s of the 20th century, when the price of gold fell by 10%, and from a slight decrease between 1993 and 1995, the price of gold has risen, sometimes considerably, in periods when the Federal Reserve has raised interest rates.
Thus, in the cycle of rate hikes that took place between January 1972 and July 1974, the price of gold went from $47.60 to $157.30 an ounce (+230.5%).
Between January 1977 and January 1981, gold went from being worth $131.30 to $506.50 an ounce (+285.8%).
Between May 2004 and September 2006, the price of gold went from $393.80 to $597.80 an ounce (+51.8%).
Finally, between December 2015 and July 2019, gold went from being worth $1,060.91 an ounce to $1,413.55 (+33.2%).
The average increase in the price of gold during the six cycles of interest rate hikes by the Fed between 1972 and 2019 is almost 100%.
“These data clearly underscore that higher interest rates by themselves are not necessarily detrimental to the price of gold . Movements in the capital market and the value of the US dollar, in addition to the conditions of the economy in general, influence the demand and, therefore, the price of the precious metal, “ says the Perth Mint report.
Inflation
Another factor that will influence the evolution of the price of gold throughout 2022 is inflation. According to the report, gold does not always rise when the inflation rate is growing. However, its track record shows that it is one of the best assets in terms of protection against rising consumer price indices.
Data from the Perth Mint reveals that the price of gold in Australian dollars has grown by an average of 20% in nominal terms during years when inflation in Australia was equal to or greater than 3%.
What makes inflation expectations so relevant to gold price developments is that the market currently expects the inflation rate to fall rapidly and remain low for the next decade.
This expectation can be visualized with the following data: when the CPI rate reached 7% in the United States in December 2021, the ten-year core inflation rate, that is, what the market expects inflation to register in the next decade, barely reached 2.56%.
This difference is the largest in the last 20 years between the current CPI rate and ten-year core inflation. According to the Perth Mint analysis, the only time a similar difference has been recorded was in 2008, and then it was barely 3%.
At that time, as now, gold had gone through a period of correction during which it had fallen by approximately 20%. That period was short-lived and ended with an explosive rise of more than 150% in the following three years.
As the report points out, “given this trajectory and the fact that there is room for the CPI rise to slow even if it continues to exceed market expectations, there are many reasons to believe that the current inflation dynamics will cause the CPI to rise. gold price over the next few years, regardless of what happens to interest rates.…
The price of gold has skyrocketed in recent weeks, with the war in Ukraine as the main catalyst. Geopolitical instability has sparked fear among investors, who are ditching risky assets and moving closer to gold, driving its price close to an all-time high. However, there are other factors that could be even more decisive, such as the start of the interest rate hike cycle in the United States.
In the latest report published by the Australian Perth Mint, it’s head of research, Jordan Eliseo, underlines that this rise in the price of gold in recent weeks, coinciding with the invasion of Ukraine by Russia, has returned the precious metal to the level of $2,000 an ounce (A$2,800 an ounce).
This rise occurs after a correction period of about 15 months, in which gold has fallen about 15% between August 2020 and January 2022. Among the factors that have caused this correction, the Western Australian Mint analyst highlights the following:
The rise in the price of the dollar by 6% during the year 2021.
Greater-than-expected growth in the global economy.
The extraordinary rise of capital markets, with the S&P 500 registering growth of more than 25% in 2021.
The strengthening of the price of cryptocurrencies during the past year, with bitcoin approaching the barrier of 000 dollars a unit.
All these factors not specific to the precious metals market caused the price of gold to undergo a correction, after having risen approximately 70%, from less than $1,200 to about $2,050 an ounce between the end of 2018 and 2020.
Despite the fact that most analyzes attribute the recovery in the price of gold to the crisis between Russia and Ukraine, a new factor recently introduced into the equation may be decisive for the future of the precious metal: the rise in interest rates for part of the US Federal Reserve.
As Jordan Eliseo’s analysis points out, “in theory, the price of gold should fall in 2022, due to the coincidence of unfavorable factors such as the rise in interest rates and the conclusion of several of the quantitative easing programs that banks plants had put in place to support their economies during the pandemic.
In theory, gold offers no returns; Therefore, if the interest rates that one can receive for depositing their money in a bank account or in a time deposit rise, the so-called opportunity cost of owning gold would rise, which should be negative for the price of the metal.
But as Eliseo points out, in reality during the last 50 years it has been shown on many occasions that the price of gold tends to rise when interest rates rise. Apart from the situation in the mid-80s of the 20th century, when the price of gold fell by 10%, and from a slight decrease between 1993 and 1995, the price of gold has risen, sometimes considerably, in periods when the Federal Reserve has raised interest rates.
Thus, in the cycle of rate hikes that took place between January 1972 and July 1974, the price of gold went from $47.60 to $157.30 an ounce (+230.5%).
Between January 1977 and January 1981, gold went from being worth $131.30 to $506.50 an ounce (+285.8%).
Between May 2004 and September 2006, the price of gold went from $393.80 to $597.80 an ounce (+51.8%).
Finally, between December 2015 and July 2019, gold went from being worth $1,060.91 an ounce to $1,413.55 (+33.2%).
The average increase in the price of gold during the six cycles of interest rate hikes by the Fed between 1972 and 2019 is almost 100%.
“These data clearly underscore that higher interest rates by themselves are not necessarily detrimental to the price of gold . Movements in the capital market and the value of the US dollar, in addition to the conditions of the economy in general, influence the demand and, therefore, the price of the precious metal, “ says the Perth Mint report.
Inflation
Another factor that will influence the evolution of the price of gold throughout 2022 is inflation. According to the report, gold does not always rise when the inflation rate is growing. However, its track record shows that it is one of the best assets in terms of protection against rising consumer price indices.
Data from the Perth Mint reveals that the price of gold in Australian dollars has grown by an average of 20% in nominal terms during years when inflation in Australia was equal to or greater than 3%.
What makes inflation expectations so relevant to gold price developments is that the market currently expects the inflation rate to fall rapidly and remain low for the next decade.
This expectation can be visualized with the following data: when the CPI rate reached 7% in the United States in December 2021, the ten-year core inflation rate, that is, what the market expects inflation to register in the next decade, barely reached 2.56%.
This difference is the largest in the last 20 years between the current CPI rate and ten-year core inflation. According to the Perth Mint analysis, the only time a similar difference has been recorded was in 2008, and then it was barely 3%.
At that time, as now, gold had gone through a period of correction during which it had fallen by approximately 20%. That period was short-lived and ended with an explosive rise of more than 150% in the following three years.
As the report points out, “given this trajectory and the fact that there is room for the CPI rise to slow even if it continues to exceed market expectations, there are many reasons to believe that the current inflation dynamics will cause the CPI to rise. gold price over the next few years, regardless of what happens to interest rates.…
)
[3] => Array
(
[title] => Gold, The Solution To The Lack Of Liquidity And Volatility Of Alternative Investments
[link] => https://companyira.gold/gold-the-solution-to-the-lack-of-liquidity-and-volatility-of-alternative-investments/
[dc] => Array
(
[creator] => Richard Gonzalez
)
[pubdate] => Mon, 14 Nov 2022 14:57:37 +0000
[category] => Gold Investment
[guid] => https://companyira.gold/?p=25
[description] =>
The current low-interest rate environment has forced investors to turn to alternative assets in search of higher returns. However, the high volatility and low liquidity of these means that today, gold is the most attractive of these alternative investment assets.
In its latest Investment Update report, the World Gold Council finds that many investors are turning to alternative investment assets given the poor performance of traditional investment assets, which are weighed down by an environment of very low-interest rates.
According to Greenwich Coalition and Mercer data compiled by the World Gold Council, investors are increasingly betting on alternative assets such as private markets (unlisted companies), tangible assets (stamps, coins, works of art, collectibles), and infrastructures.
It is estimated that, within three years, the percentage of these alternative assets in the portfolio of investors will grow to represent a third of the total.
As the World Gold Council points out, “most of these alternative investment assets have historically contributed to achieving the desired profitability, but they have much less liquidity . This, together with the flight from higher quality fixed income assets, causes an increase in volatility and a decrease in the liquidity of the investment portfolio, something that must be taken into account in an environment of high inflation”.
Liquidity
As regards liquidity, the 2008 financial crisis highlighted the difficulties that exist when it comes to getting rid of some investment assets at times when capital is needed.
This problem is common to alternative investments such as private market companies, cryptocurrencies, collectibles, or real estate.
Faced with this lack of liquidity, the World Council report defends the role of gold as the most liquid asset with which to achieve a balanced investment portfolio and satisfy the liquidity needs of investors.
As can be seen in the graph, this liquidity of gold derives from the enormous size of its market, which is close to 150,000 million dollars a day.
Only the shares of the S&P 500 index of the US stock market and US Treasury bonds exceed the precious metal in daily volume.
Volatility
The other problem that investors have to deal with is volatility. The attached chart shows how both stocks and the vast majority of alternative investment assets have much higher volatility than gold.
The classification of the most volatile assets of the last five years is headed, as it could not be otherwise, by bitcoin, with an annual index close to 75%.
On the contrary, gold is presented as one of the least volatile assets, which is why it is a highly recommended element to include in any investment portfolio.…
The current low-interest rate environment has forced investors to turn to alternative assets in search of higher returns. However, the high volatility and low liquidity of these means that today, gold is the most attractive of these alternative investment assets.
In its latest Investment Update report, the World Gold Council finds that many investors are turning to alternative investment assets given the poor performance of traditional investment assets, which are weighed down by an environment of very low-interest rates.
According to Greenwich Coalition and Mercer data compiled by the World Gold Council, investors are increasingly betting on alternative assets such as private markets (unlisted companies), tangible assets (stamps, coins, works of art, collectibles), and infrastructures.
It is estimated that, within three years, the percentage of these alternative assets in the portfolio of investors will grow to represent a third of the total.
As the World Gold Council points out, “most of these alternative investment assets have historically contributed to achieving the desired profitability, but they have much less liquidity . This, together with the flight from higher quality fixed income assets, causes an increase in volatility and a decrease in the liquidity of the investment portfolio, something that must be taken into account in an environment of high inflation”.
Liquidity
As regards liquidity, the 2008 financial crisis highlighted the difficulties that exist when it comes to getting rid of some investment assets at times when capital is needed.
This problem is common to alternative investments such as private market companies, cryptocurrencies, collectibles, or real estate.
Faced with this lack of liquidity, the World Council report defends the role of gold as the most liquid asset with which to achieve a balanced investment portfolio and satisfy the liquidity needs of investors.
As can be seen in the graph, this liquidity of gold derives from the enormous size of its market, which is close to 150,000 million dollars a day.
Only the shares of the S&P 500 index of the US stock market and US Treasury bonds exceed the precious metal in daily volume.
Volatility
The other problem that investors have to deal with is volatility. The attached chart shows how both stocks and the vast majority of alternative investment assets have much higher volatility than gold.
The classification of the most volatile assets of the last five years is headed, as it could not be otherwise, by bitcoin, with an annual index close to 75%.
On the contrary, gold is presented as one of the least volatile assets, which is why it is a highly recommended element to include in any investment portfolio.…
The current low-interest rate environment has forced investors to turn to alternative assets in search of higher returns. However, the high volatility and low liquidity of these means that today, gold is the most attractive of these alternative investment assets.
In its latest Investment Update report, the World Gold Council finds that many investors are turning to alternative investment assets given the poor performance of traditional investment assets, which are weighed down by an environment of very low-interest rates.
According to Greenwich Coalition and Mercer data compiled by the World Gold Council, investors are increasingly betting on alternative assets such as private markets (unlisted companies), tangible assets (stamps, coins, works of art, collectibles), and infrastructures.
It is estimated that, within three years, the percentage of these alternative assets in the portfolio of investors will grow to represent a third of the total.
As the World Gold Council points out, “most of these alternative investment assets have historically contributed to achieving the desired profitability, but they have much less liquidity . This, together with the flight from higher quality fixed income assets, causes an increase in volatility and a decrease in the liquidity of the investment portfolio, something that must be taken into account in an environment of high inflation”.
Liquidity
As regards liquidity, the 2008 financial crisis highlighted the difficulties that exist when it comes to getting rid of some investment assets at times when capital is needed.
This problem is common to alternative investments such as private market companies, cryptocurrencies, collectibles, or real estate.
Faced with this lack of liquidity, the World Council report defends the role of gold as the most liquid asset with which to achieve a balanced investment portfolio and satisfy the liquidity needs of investors.
As can be seen in the graph, this liquidity of gold derives from the enormous size of its market, which is close to 150,000 million dollars a day.
Only the shares of the S&P 500 index of the US stock market and US Treasury bonds exceed the precious metal in daily volume.
Volatility
The other problem that investors have to deal with is volatility. The attached chart shows how both stocks and the vast majority of alternative investment assets have much higher volatility than gold.
The classification of the most volatile assets of the last five years is headed, as it could not be otherwise, by bitcoin, with an annual index close to 75%.
On the contrary, gold is presented as one of the least volatile assets, which is why it is a highly recommended element to include in any investment portfolio.…
The current low-interest rate environment has forced investors to turn to alternative assets in search of higher returns. However, the high volatility and low liquidity of these means that today, gold is the most attractive of these alternative investment assets.
In its latest Investment Update report, the World Gold Council finds that many investors are turning to alternative investment assets given the poor performance of traditional investment assets, which are weighed down by an environment of very low-interest rates.
According to Greenwich Coalition and Mercer data compiled by the World Gold Council, investors are increasingly betting on alternative assets such as private markets (unlisted companies), tangible assets (stamps, coins, works of art, collectibles), and infrastructures.
It is estimated that, within three years, the percentage of these alternative assets in the portfolio of investors will grow to represent a third of the total.
As the World Gold Council points out, “most of these alternative investment assets have historically contributed to achieving the desired profitability, but they have much less liquidity . This, together with the flight from higher quality fixed income assets, causes an increase in volatility and a decrease in the liquidity of the investment portfolio, something that must be taken into account in an environment of high inflation”.
Liquidity
As regards liquidity, the 2008 financial crisis highlighted the difficulties that exist when it comes to getting rid of some investment assets at times when capital is needed.
This problem is common to alternative investments such as private market companies, cryptocurrencies, collectibles, or real estate.
Faced with this lack of liquidity, the World Council report defends the role of gold as the most liquid asset with which to achieve a balanced investment portfolio and satisfy the liquidity needs of investors.
As can be seen in the graph, this liquidity of gold derives from the enormous size of its market, which is close to 150,000 million dollars a day.
Only the shares of the S&P 500 index of the US stock market and US Treasury bonds exceed the precious metal in daily volume.
Volatility
The other problem that investors have to deal with is volatility. The attached chart shows how both stocks and the vast majority of alternative investment assets have much higher volatility than gold.
The classification of the most volatile assets of the last five years is headed, as it could not be otherwise, by bitcoin, with an annual index close to 75%.
On the contrary, gold is presented as one of the least volatile assets, which is why it is a highly recommended element to include in any investment portfolio.…
)
[4] => Array
(
[title] => Gold, Is The Best Investment Asset In A Stagflation Environment
[link] => https://companyira.gold/gold-is-the-best-investment-asset-in-a-stagflation-environment/
[dc] => Array
(
[creator] => Richard Gonzalez
)
[pubdate] => Sun, 13 Nov 2022 14:57:38 +0000
[category] => Investing During Stagflation
[guid] => https://companyira.gold/?p=26
[description] =>
Stagflation has become one of the buzzwords lately in the markets. This is a phenomenon characterized by a combination of an environment of rising prices and a slowdown in economic growth. In other words, the situation we are experiencing right now.
In its latest Investment Update, the World Gold Council warns that stagflation is coming and explains how gold can serve as a hedge.
According to the World Council, “severe stagflation can be very damaging to both the economy and financial markets .But it is not necessary to repeat the situation of the 70s for assets to be affected. Our analyzes show that even the mildest inflationary conditions can have an impact on assets similar to what occurs in the most severe situations of stagflation ”.
Regarding its effects on investment assets, the report notes that “historically, stagflation has severely affected stocks, while both commodities and gold have performed well . “
In the case of gold, its historically good performance in these cases is attributed to several factors. On the one hand, rising inflation and market volatility encourage investors to preserve their capital.
On the other hand, the low-interest rate environment reduces the opportunity cost of investing in gold and increases investors’ aversion to riskier assets.
Gold, The Best Since 1973
The World Gold Council report reviews the appreciation of various investment assets during periods of stagflation since 1973.
Their conclusions indicate that between the first quarter of 1973 and the second of 2021, the assets that have performed best have been defensive and tangible, especially gold, while shares have been the ones that have suffered the most.
Thus, in the periods of stagflation that have occurred since 1973, the S&P 500 stock index has fallen an annual average of 6.6%, while the stock markets of developed markets except the United States have fallen 11.6% annually.
“Tangible assets have performed well during periods of stagflation, while gold has tended to benefit from the elevated risk environment, rising inflation and lower real interest rates. The significant revaluation of gold has occurred even despite the strengthening of the dollar that usually occurs during periods of stagflation”, points out the World Gold Council.
As regards the last 20 years, the only assets that have offered positive returns have been gold and bonds, in the four different scenarios that have followed one another.
In the case of gold, its average annual revaluation in dollars has been much higher than that of bonds, in some cases even doubling it.
For their part, stocks have performed very poorly, even in the milder scenarios.
Conclusions
In the report’s conclusions, World Gold Council analysts note that “stagflationary environments of falling revenues and rising prices have been shown to be as frequent as they are long-lasting. When they occur in their most severe form, they can cause significant damage to both the economy and financial assets.
A repeat of the most powerful version of stagflation could do gold very well, based on historical analysis, which shows that it has been the best of the major investment assets since the second quarter of 1973. ”
Stagflation has become one of the buzzwords lately in the markets. This is a phenomenon characterized by a combination of an environment of rising prices and a slowdown in economic growth. In other words, the situation we are experiencing right now.
In its latest Investment Update, the World Gold Council warns that stagflation is coming and explains how gold can serve as a hedge.
According to the World Council, “severe stagflation can be very damaging to both the economy and financial markets .But it is not necessary to repeat the situation of the 70s for assets to be affected. Our analyzes show that even the mildest inflationary conditions can have an impact on assets similar to what occurs in the most severe situations of stagflation ”.
Regarding its effects on investment assets, the report notes that “historically, stagflation has severely affected stocks, while both commodities and gold have performed well . “
In the case of gold, its historically good performance in these cases is attributed to several factors. On the one hand, rising inflation and market volatility encourage investors to preserve their capital.
On the other hand, the low-interest rate environment reduces the opportunity cost of investing in gold and increases investors’ aversion to riskier assets.
Gold, The Best Since 1973
The World Gold Council report reviews the appreciation of various investment assets during periods of stagflation since 1973.
Their conclusions indicate that between the first quarter of 1973 and the second of 2021, the assets that have performed best have been defensive and tangible, especially gold, while shares have been the ones that have suffered the most.
Thus, in the periods of stagflation that have occurred since 1973, the S&P 500 stock index has fallen an annual average of 6.6%, while the stock markets of developed markets except the United States have fallen 11.6% annually.
“Tangible assets have performed well during periods of stagflation, while gold has tended to benefit from the elevated risk environment, rising inflation and lower real interest rates. The significant revaluation of gold has occurred even despite the strengthening of the dollar that usually occurs during periods of stagflation”, points out the World Gold Council.
As regards the last 20 years, the only assets that have offered positive returns have been gold and bonds, in the four different scenarios that have followed one another.
In the case of gold, its average annual revaluation in dollars has been much higher than that of bonds, in some cases even doubling it.
For their part, stocks have performed very poorly, even in the milder scenarios.
Conclusions
In the report’s conclusions, World Gold Council analysts note that “stagflationary environments of falling revenues and rising prices have been shown to be as frequent as they are long-lasting. When they occur in their most severe form, they can cause significant damage to both the economy and financial assets.
A repeat of the most powerful version of stagflation could do gold very well, based on historical analysis, which shows that it has been the best of the major investment assets since the second quarter of 1973. ”
Stagflation has become one of the buzzwords lately in the markets. This is a phenomenon characterized by a combination of an environment of rising prices and a slowdown in economic growth. In other words, the situation we are experiencing right now.
In its latest Investment Update, the World Gold Council warns that stagflation is coming and explains how gold can serve as a hedge.
According to the World Council, “severe stagflation can be very damaging to both the economy and financial markets .But it is not necessary to repeat the situation of the 70s for assets to be affected. Our analyzes show that even the mildest inflationary conditions can have an impact on assets similar to what occurs in the most severe situations of stagflation ”.
Regarding its effects on investment assets, the report notes that “historically, stagflation has severely affected stocks, while both commodities and gold have performed well . “
In the case of gold, its historically good performance in these cases is attributed to several factors. On the one hand, rising inflation and market volatility encourage investors to preserve their capital.
On the other hand, the low-interest rate environment reduces the opportunity cost of investing in gold and increases investors’ aversion to riskier assets.
Gold, The Best Since 1973
The World Gold Council report reviews the appreciation of various investment assets during periods of stagflation since 1973.
Their conclusions indicate that between the first quarter of 1973 and the second of 2021, the assets that have performed best have been defensive and tangible, especially gold, while shares have been the ones that have suffered the most.
Thus, in the periods of stagflation that have occurred since 1973, the S&P 500 stock index has fallen an annual average of 6.6%, while the stock markets of developed markets except the United States have fallen 11.6% annually.
“Tangible assets have performed well during periods of stagflation, while gold has tended to benefit from the elevated risk environment, rising inflation and lower real interest rates. The significant revaluation of gold has occurred even despite the strengthening of the dollar that usually occurs during periods of stagflation”, points out the World Gold Council.
As regards the last 20 years, the only assets that have offered positive returns have been gold and bonds, in the four different scenarios that have followed one another.
In the case of gold, its average annual revaluation in dollars has been much higher than that of bonds, in some cases even doubling it.
For their part, stocks have performed very poorly, even in the milder scenarios.
Conclusions
In the report’s conclusions, World Gold Council analysts note that “stagflationary environments of falling revenues and rising prices have been shown to be as frequent as they are long-lasting. When they occur in their most severe form, they can cause significant damage to both the economy and financial assets.
A repeat of the most powerful version of stagflation could do gold very well, based on historical analysis, which shows that it has been the best of the major investment assets since the second quarter of 1973. ”
Stagflation has become one of the buzzwords lately in the markets. This is a phenomenon characterized by a combination of an environment of rising prices and a slowdown in economic growth. In other words, the situation we are experiencing right now.
In its latest Investment Update, the World Gold Council warns that stagflation is coming and explains how gold can serve as a hedge.
According to the World Council, “severe stagflation can be very damaging to both the economy and financial markets .But it is not necessary to repeat the situation of the 70s for assets to be affected. Our analyzes show that even the mildest inflationary conditions can have an impact on assets similar to what occurs in the most severe situations of stagflation ”.
Regarding its effects on investment assets, the report notes that “historically, stagflation has severely affected stocks, while both commodities and gold have performed well . “
In the case of gold, its historically good performance in these cases is attributed to several factors. On the one hand, rising inflation and market volatility encourage investors to preserve their capital.
On the other hand, the low-interest rate environment reduces the opportunity cost of investing in gold and increases investors’ aversion to riskier assets.
Gold, The Best Since 1973
The World Gold Council report reviews the appreciation of various investment assets during periods of stagflation since 1973.
Their conclusions indicate that between the first quarter of 1973 and the second of 2021, the assets that have performed best have been defensive and tangible, especially gold, while shares have been the ones that have suffered the most.
Thus, in the periods of stagflation that have occurred since 1973, the S&P 500 stock index has fallen an annual average of 6.6%, while the stock markets of developed markets except the United States have fallen 11.6% annually.
“Tangible assets have performed well during periods of stagflation, while gold has tended to benefit from the elevated risk environment, rising inflation and lower real interest rates. The significant revaluation of gold has occurred even despite the strengthening of the dollar that usually occurs during periods of stagflation”, points out the World Gold Council.
As regards the last 20 years, the only assets that have offered positive returns have been gold and bonds, in the four different scenarios that have followed one another.
In the case of gold, its average annual revaluation in dollars has been much higher than that of bonds, in some cases even doubling it.
For their part, stocks have performed very poorly, even in the milder scenarios.
Conclusions
In the report’s conclusions, World Gold Council analysts note that “stagflationary environments of falling revenues and rising prices have been shown to be as frequent as they are long-lasting. When they occur in their most severe form, they can cause significant damage to both the economy and financial assets.
A repeat of the most powerful version of stagflation could do gold very well, based on historical analysis, which shows that it has been the best of the major investment assets since the second quarter of 1973. ”
The current economic situation could lead to a stagflation scenario, characterized by high inflation and a recession in economic growth. The risk is greater in Europe than in the United States, due to its more delicate economic position and the rise in prices of raw materials. In this scenario, the price of gold could skyrocket, since it is an asset that protects against risk and diversifies the investment portfolio.
The price of gold has skyrocketed in recent weeks, with the war in Ukraine as the main catalyst. Geopolitical instability has sparked fear among investors, who are ditching risky assets and moving closer to gold, driving its price close to an all-time high. However, there are other factors that could be even more decisive, such as the start of the interest rate hike cycle in the United States.
Inflation
The current low-interest rate environment has forced investors to turn to alternative assets in search of higher returns. However, the high volatility and low liquidity of these means that today, gold is the most attractive of these alternative investment assets.
Stagflation has become one of the buzzwords lately in the markets. This is a phenomenon characterized by a combination of an environment of rising prices and a slowdown in economic growth. In other words, the situation we are experiencing right now.