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[title] => The Reasons Why The Price Of Gold Fell In February
[link] => https://goldandsilverira.reviews/the-reasons-why-the-price-of-gold-fell-in-february/
[dc] => Array
(
[creator] => John Blackwood
)
[pubdate] => Tue, 29 Nov 2022 10:18:20 +0000
[category] => Price of Gold
[guid] => https://goldandsilverira.reviews/?p=19
[description] =>
After excellent performance in recent years, the price of gold is undergoing a correction that has raised alarm bells among some investors. These types of corrections are common; the price cannot rise uninterruptedly and the correction is healthy to energize the market. In this post we are going to explain the reasons why the price of gold has fallen in February.
The past month of February has been plagued with ups and downs for gold. The metal started the month trading at $1,862.95 an ounce on February 1 on the London Bullion Market Association (LBMA) and closed it on the 26th of the same month at $1,742.85 . That is, a fall of 6.45% throughout the month.
To have a bit of perspective, it should be remembered that the price of the metal began the month of February 2020 at $1,574.75 an ounce on the 3rd and closed it at $1,609.85 on the 28th .
In other words, we are talking about a correction to a higher level of more than $200 than what it had during the past year at this point.
Bond Yields
Gold’s correction in February has been influenced by several events. One of the most decisive has been the rise in yields on treasury bonds , the asset with which gold usually competes for the favor of investors.
At the same time, there was a drop in inflation expectations: the index that measures five-year inflation expectations in the United States fell almost 10% in the last two weeks of February, closing the month at 1.91%.
The combination of both factors (higher bond yields and lower inflation expectations) have caused real yields (nominal minus inflation) to rise 30% over the past month, from -1.01 to -0.7%.
In the short term, this may affect the evolution of the gold price. But it’s important to note that 20-year bond yields, which are key for long-term investors, are still negative, so they won’t affect gold investors with that window of time.
Markets Rise
To these factors related to bond yields and inflation must be added the continued rise in capital markets during the month of February, and the return of some investors to riskier assets. During the month of February, the positive news regarding the Covid-19 pandemic in the United States multiplied, with a drop in the number of confirmed cases, as well as in hospitalizations and deaths.
All these factors together have caused a certain loss of investor interest in safe-haven assets such as gold, which explains this correction in the price of the metal.
Future Perspectives
According to Jordan Eliseo , Head of Market Research at Australia ‘s Perth Mint , “a continued rise in bond yields could be a drag on gold, although precious metals may see increased investment demand for safe haven assets if this environment of rising bond yields causes some deflationary shock or a significant correction in the markets”.
Therefore, it is not necessary to get carried away by catastrophizing and take stock of what gold has been losing, but to observe the long-term panorama, in which the trend of the precious metal will always be upward.
After excellent performance in recent years, the price of gold is undergoing a correction that has raised alarm bells among some investors. These types of corrections are common; the price cannot rise uninterruptedly and the correction is healthy to energize the market. In this post we are going to explain the reasons why the price of gold has fallen in February.
The past month of February has been plagued with ups and downs for gold. The metal started the month trading at $1,862.95 an ounce on February 1 on the London Bullion Market Association (LBMA) and closed it on the 26th of the same month at $1,742.85 . That is, a fall of 6.45% throughout the month.
To have a bit of perspective, it should be remembered that the price of the metal began the month of February 2020 at $1,574.75 an ounce on the 3rd and closed it at $1,609.85 on the 28th .
In other words, we are talking about a correction to a higher level of more than $200 than what it had during the past year at this point.
Bond Yields
Gold’s correction in February has been influenced by several events. One of the most decisive has been the rise in yields on treasury bonds , the asset with which gold usually competes for the favor of investors.
At the same time, there was a drop in inflation expectations: the index that measures five-year inflation expectations in the United States fell almost 10% in the last two weeks of February, closing the month at 1.91%.
The combination of both factors (higher bond yields and lower inflation expectations) have caused real yields (nominal minus inflation) to rise 30% over the past month, from -1.01 to -0.7%.
In the short term, this may affect the evolution of the gold price. But it’s important to note that 20-year bond yields, which are key for long-term investors, are still negative, so they won’t affect gold investors with that window of time.
Markets Rise
To these factors related to bond yields and inflation must be added the continued rise in capital markets during the month of February, and the return of some investors to riskier assets. During the month of February, the positive news regarding the Covid-19 pandemic in the United States multiplied, with a drop in the number of confirmed cases, as well as in hospitalizations and deaths.
All these factors together have caused a certain loss of investor interest in safe-haven assets such as gold, which explains this correction in the price of the metal.
Future Perspectives
According to Jordan Eliseo , Head of Market Research at Australia ‘s Perth Mint , “a continued rise in bond yields could be a drag on gold, although precious metals may see increased investment demand for safe haven assets if this environment of rising bond yields causes some deflationary shock or a significant correction in the markets”.
Therefore, it is not necessary to get carried away by catastrophizing and take stock of what gold has been losing, but to observe the long-term panorama, in which the trend of the precious metal will always be upward.
After excellent performance in recent years, the price of gold is undergoing a correction that has raised alarm bells among some investors. These types of corrections are common; the price cannot rise uninterruptedly and the correction is healthy to energize the market. In this post we are going to explain the reasons why the price of gold has fallen in February.
The past month of February has been plagued with ups and downs for gold. The metal started the month trading at $1,862.95 an ounce on February 1 on the London Bullion Market Association (LBMA) and closed it on the 26th of the same month at $1,742.85 . That is, a fall of 6.45% throughout the month.
To have a bit of perspective, it should be remembered that the price of the metal began the month of February 2020 at $1,574.75 an ounce on the 3rd and closed it at $1,609.85 on the 28th .
In other words, we are talking about a correction to a higher level of more than $200 than what it had during the past year at this point.
Bond Yields
Gold’s correction in February has been influenced by several events. One of the most decisive has been the rise in yields on treasury bonds , the asset with which gold usually competes for the favor of investors.
At the same time, there was a drop in inflation expectations: the index that measures five-year inflation expectations in the United States fell almost 10% in the last two weeks of February, closing the month at 1.91%.
The combination of both factors (higher bond yields and lower inflation expectations) have caused real yields (nominal minus inflation) to rise 30% over the past month, from -1.01 to -0.7%.
In the short term, this may affect the evolution of the gold price. But it’s important to note that 20-year bond yields, which are key for long-term investors, are still negative, so they won’t affect gold investors with that window of time.
Markets Rise
To these factors related to bond yields and inflation must be added the continued rise in capital markets during the month of February, and the return of some investors to riskier assets. During the month of February, the positive news regarding the Covid-19 pandemic in the United States multiplied, with a drop in the number of confirmed cases, as well as in hospitalizations and deaths.
All these factors together have caused a certain loss of investor interest in safe-haven assets such as gold, which explains this correction in the price of the metal.
Future Perspectives
According to Jordan Eliseo , Head of Market Research at Australia ‘s Perth Mint , “a continued rise in bond yields could be a drag on gold, although precious metals may see increased investment demand for safe haven assets if this environment of rising bond yields causes some deflationary shock or a significant correction in the markets”.
Therefore, it is not necessary to get carried away by catastrophizing and take stock of what gold has been losing, but to observe the long-term panorama, in which the trend of the precious metal will always be upward.
After excellent performance in recent years, the price of gold is undergoing a correction that has raised alarm bells among some investors. These types of corrections are common; the price cannot rise uninterruptedly and the correction is healthy to energize the market. In this post we are going to explain the reasons why the price of gold has fallen in February.
The past month of February has been plagued with ups and downs for gold. The metal started the month trading at $1,862.95 an ounce on February 1 on the London Bullion Market Association (LBMA) and closed it on the 26th of the same month at $1,742.85 . That is, a fall of 6.45% throughout the month.
To have a bit of perspective, it should be remembered that the price of the metal began the month of February 2020 at $1,574.75 an ounce on the 3rd and closed it at $1,609.85 on the 28th .
In other words, we are talking about a correction to a higher level of more than $200 than what it had during the past year at this point.
Bond Yields
Gold’s correction in February has been influenced by several events. One of the most decisive has been the rise in yields on treasury bonds , the asset with which gold usually competes for the favor of investors.
At the same time, there was a drop in inflation expectations: the index that measures five-year inflation expectations in the United States fell almost 10% in the last two weeks of February, closing the month at 1.91%.
The combination of both factors (higher bond yields and lower inflation expectations) have caused real yields (nominal minus inflation) to rise 30% over the past month, from -1.01 to -0.7%.
In the short term, this may affect the evolution of the gold price. But it’s important to note that 20-year bond yields, which are key for long-term investors, are still negative, so they won’t affect gold investors with that window of time.
Markets Rise
To these factors related to bond yields and inflation must be added the continued rise in capital markets during the month of February, and the return of some investors to riskier assets. During the month of February, the positive news regarding the Covid-19 pandemic in the United States multiplied, with a drop in the number of confirmed cases, as well as in hospitalizations and deaths.
All these factors together have caused a certain loss of investor interest in safe-haven assets such as gold, which explains this correction in the price of the metal.
Future Perspectives
According to Jordan Eliseo , Head of Market Research at Australia ‘s Perth Mint , “a continued rise in bond yields could be a drag on gold, although precious metals may see increased investment demand for safe haven assets if this environment of rising bond yields causes some deflationary shock or a significant correction in the markets”.
Therefore, it is not necessary to get carried away by catastrophizing and take stock of what gold has been losing, but to observe the long-term panorama, in which the trend of the precious metal will always be upward.
)
[1] => Array
(
[title] => How The Coronavirus Has Changed The Structure Of Global Gold Demand
[link] => https://goldandsilverira.reviews/how-the-coronavirus-has-changed-the-structure-of-global-gold-demand/
[dc] => Array
(
[creator] => John Blackwood
)
[pubdate] => Mon, 28 Nov 2022 10:26:42 +0000
[category] => Gold Demand
[guid] => https://goldandsilverira.reviews/?p=33
[description] =>
The Covid-19 pandemic has disrupted all areas of our lives in 2020, from the social to the economic. The precious metals market has not been an exception and, although it has benefited from the flight of investors towards a safe haven, it has also undergone significant changes. In this post we are going to explain how the structure of the global demand for gold has changed as a result of the pandemic.
As we have already explained from this blog, gold and silver have highlighted their status as refuge assets during the fateful year 2020.
A combination of favorable factors (low interest rates, the fall in the value of the dollar, the threat of rising inflation, uncertainty in the economic field and unprecedented measures in monetary and fiscal policy) has allowed them to appreciate 47% (silver) . and gain 24%, beating its historical maximum price (gold) .
Changes In Demand
However, the Covid-19 pandemic has had an impact on precious metals beyond the rise in their prices. The most striking effect, in terms of the gold market, has been the modification of the traditional structure of the demand for this precious metal.
During the last years, the distribution between the different sectors of the demand has barely changed. As can be seen in the attached graph, prepared by the World Gold Council , in the last decade the jewelery sector has accounted for most of the global demand for gold, with an average of more than 2,000 tons per year .
This demand is dominated by two Asian countries , China and India , where the gold jewelery sector is very powerful.
The second most important sector in terms of demand is investment , both physical (ingots and coins) and on paper (ETF) .
The third place in terms of global demand for gold has been disputed in recent years between the technology sector and the so-called official sector, that is, the central banks .
As can be seen in the graph, in 2010 the technology sector far exceeded the demand of central banks.
However, starting in 2011, the situation changed, as the official sector became a net buyer of gold for its reserves, driven by the significant rise in the metal that year.
Since then, central banks have stabilized as the third sector with the highest demand for gold, behind jewelry and investment.
The years 2018 and 2019 were the best of the decade for the official sector, which increased its gold reserves by more than 650 tons in each of those years.
The global outbreak of the coronavirus has altered the state of the economy on a global scale. The gold sector began to suffer this impact from the end of the first quarter of the year.
The restrictions on international transport and the closure of mines and refineries due to the pandemic control measures adopted by governments caused a veritable earthquake in the gold industry.
For the purposes of the lawsuit, the consequences were notable. According to the Gold Demand Trends report for the third quarter of the year, the latest published by the World Gold Council , demand from the jewelry sector plummeted, that of the technology sector and central banks fell, and that of the investment skyrocketed.
In the absence of data from the last quarter of 2020, the demand from the jewelry sector was barely 333 tons as of September 30, 30% less than on the same dates of the previous year.
The drop was very significant in India , whose jewelry sector went from consuming 101.6 tons of gold in the first nine months of 2019 to just 52.8; that is, 48% less .
In China , the situation was not much better, going from 158.1 tons in September 2019 to 119.1 a year later, 25% less .
Technology
The technology sector has also been affected by the economic crisis derived from the pandemic. Its demand for gold at the end of the third quarter of 2020 fell by 6% year-on-year, to 76.7 tons .
Both the closures of industries forced by the control measures of the pandemic, as well as the reduction in spending by consumers, due to the economic crisis, have had a full impact on the sector and have reduced its consumption of gold.
Central Banks
In the case of central banks, the third quarter was an important milestone, since for the first time since 2011 they sold more gold than they bought, becoming net sellers (-12.1 Tm) .
However, from the World Gold Council they recall that the demand for the first three quarters of the year rises to 220.6 tons of gold and that the central banks will continue to be net buyers of gold in 2020 , although in less volume than the previous years.
Investment
The main beneficiary of the crisis situation generated by the pandemic has been the gold investment sector.
For the first time in history, the demand for investment gold has exceeded that of the jewelry sector: 494.6 tons, 21% more than at the end of the third quarter of 2019 and exceeding the 33 tons consumed by the jewelry sector.
Investors have launched into the purchase of gold bars and coins, whose sales figure (222.1 Tm) at the end of September exceeded that of the previous year by 49% and became the highest of all time.
Investment in gold ETFs also increased compared to the previous year, although by barely 5%, to 272.5 tons .
The change in the structure of the global demand for gold caused by the pandemic has resulted in a boost from the investment sector , which has taken over from the jewelry sector as the main consumer of the precious metal.
We will have to wait for the closing of the annual data to analyze the true impact of the coronavirus on the demand for gold.
Looking to the future, although it is foreseeable that the investment sector will continue to have a significant presence, it is logical that, as the economic recovery progresses, the jewelery sector will recover its strength.…
The Covid-19 pandemic has disrupted all areas of our lives in 2020, from the social to the economic. The precious metals market has not been an exception and, although it has benefited from the flight of investors towards a safe haven, it has also undergone significant changes. In this post we are going to explain how the structure of the global demand for gold has changed as a result of the pandemic.
As we have already explained from this blog, gold and silver have highlighted their status as refuge assets during the fateful year 2020.
A combination of favorable factors (low interest rates, the fall in the value of the dollar, the threat of rising inflation, uncertainty in the economic field and unprecedented measures in monetary and fiscal policy) has allowed them to appreciate 47% (silver) . and gain 24%, beating its historical maximum price (gold) .
Changes In Demand
However, the Covid-19 pandemic has had an impact on precious metals beyond the rise in their prices. The most striking effect, in terms of the gold market, has been the modification of the traditional structure of the demand for this precious metal.
During the last years, the distribution between the different sectors of the demand has barely changed. As can be seen in the attached graph, prepared by the World Gold Council , in the last decade the jewelery sector has accounted for most of the global demand for gold, with an average of more than 2,000 tons per year .
This demand is dominated by two Asian countries , China and India , where the gold jewelery sector is very powerful.
The second most important sector in terms of demand is investment , both physical (ingots and coins) and on paper (ETF) .
The third place in terms of global demand for gold has been disputed in recent years between the technology sector and the so-called official sector, that is, the central banks .
As can be seen in the graph, in 2010 the technology sector far exceeded the demand of central banks.
However, starting in 2011, the situation changed, as the official sector became a net buyer of gold for its reserves, driven by the significant rise in the metal that year.
Since then, central banks have stabilized as the third sector with the highest demand for gold, behind jewelry and investment.
The years 2018 and 2019 were the best of the decade for the official sector, which increased its gold reserves by more than 650 tons in each of those years.
The global outbreak of the coronavirus has altered the state of the economy on a global scale. The gold sector began to suffer this impact from the end of the first quarter of the year.
The restrictions on international transport and the closure of mines and refineries due to the pandemic control measures adopted by governments caused a veritable earthquake in the gold industry.
For the purposes of the lawsuit, the consequences were notable. According to the Gold Demand Trends report for the third quarter of the year, the latest published by the World Gold Council , demand from the jewelry sector plummeted, that of the technology sector and central banks fell, and that of the investment skyrocketed.
In the absence of data from the last quarter of 2020, the demand from the jewelry sector was barely 333 tons as of September 30, 30% less than on the same dates of the previous year.
The drop was very significant in India , whose jewelry sector went from consuming 101.6 tons of gold in the first nine months of 2019 to just 52.8; that is, 48% less .
In China , the situation was not much better, going from 158.1 tons in September 2019 to 119.1 a year later, 25% less .
Technology
The technology sector has also been affected by the economic crisis derived from the pandemic. Its demand for gold at the end of the third quarter of 2020 fell by 6% year-on-year, to 76.7 tons .
Both the closures of industries forced by the control measures of the pandemic, as well as the reduction in spending by consumers, due to the economic crisis, have had a full impact on the sector and have reduced its consumption of gold.
Central Banks
In the case of central banks, the third quarter was an important milestone, since for the first time since 2011 they sold more gold than they bought, becoming net sellers (-12.1 Tm) .
However, from the World Gold Council they recall that the demand for the first three quarters of the year rises to 220.6 tons of gold and that the central banks will continue to be net buyers of gold in 2020 , although in less volume than the previous years.
Investment
The main beneficiary of the crisis situation generated by the pandemic has been the gold investment sector.
For the first time in history, the demand for investment gold has exceeded that of the jewelry sector: 494.6 tons, 21% more than at the end of the third quarter of 2019 and exceeding the 33 tons consumed by the jewelry sector.
Investors have launched into the purchase of gold bars and coins, whose sales figure (222.1 Tm) at the end of September exceeded that of the previous year by 49% and became the highest of all time.
Investment in gold ETFs also increased compared to the previous year, although by barely 5%, to 272.5 tons .
The change in the structure of the global demand for gold caused by the pandemic has resulted in a boost from the investment sector , which has taken over from the jewelry sector as the main consumer of the precious metal.
We will have to wait for the closing of the annual data to analyze the true impact of the coronavirus on the demand for gold.
Looking to the future, although it is foreseeable that the investment sector will continue to have a significant presence, it is logical that, as the economic recovery progresses, the jewelery sector will recover its strength.…
The Covid-19 pandemic has disrupted all areas of our lives in 2020, from the social to the economic. The precious metals market has not been an exception and, although it has benefited from the flight of investors towards a safe haven, it has also undergone significant changes. In this post we are going to explain how the structure of the global demand for gold has changed as a result of the pandemic.
As we have already explained from this blog, gold and silver have highlighted their status as refuge assets during the fateful year 2020.
A combination of favorable factors (low interest rates, the fall in the value of the dollar, the threat of rising inflation, uncertainty in the economic field and unprecedented measures in monetary and fiscal policy) has allowed them to appreciate 47% (silver) . and gain 24%, beating its historical maximum price (gold) .
Changes In Demand
However, the Covid-19 pandemic has had an impact on precious metals beyond the rise in their prices. The most striking effect, in terms of the gold market, has been the modification of the traditional structure of the demand for this precious metal.
During the last years, the distribution between the different sectors of the demand has barely changed. As can be seen in the attached graph, prepared by the World Gold Council , in the last decade the jewelery sector has accounted for most of the global demand for gold, with an average of more than 2,000 tons per year .
This demand is dominated by two Asian countries , China and India , where the gold jewelery sector is very powerful.
The second most important sector in terms of demand is investment , both physical (ingots and coins) and on paper (ETF) .
The third place in terms of global demand for gold has been disputed in recent years between the technology sector and the so-called official sector, that is, the central banks .
As can be seen in the graph, in 2010 the technology sector far exceeded the demand of central banks.
However, starting in 2011, the situation changed, as the official sector became a net buyer of gold for its reserves, driven by the significant rise in the metal that year.
Since then, central banks have stabilized as the third sector with the highest demand for gold, behind jewelry and investment.
The years 2018 and 2019 were the best of the decade for the official sector, which increased its gold reserves by more than 650 tons in each of those years.
The global outbreak of the coronavirus has altered the state of the economy on a global scale. The gold sector began to suffer this impact from the end of the first quarter of the year.
The restrictions on international transport and the closure of mines and refineries due to the pandemic control measures adopted by governments caused a veritable earthquake in the gold industry.
For the purposes of the lawsuit, the consequences were notable. According to the Gold Demand Trends report for the third quarter of the year, the latest published by the World Gold Council , demand from the jewelry sector plummeted, that of the technology sector and central banks fell, and that of the investment skyrocketed.
In the absence of data from the last quarter of 2020, the demand from the jewelry sector was barely 333 tons as of September 30, 30% less than on the same dates of the previous year.
The drop was very significant in India , whose jewelry sector went from consuming 101.6 tons of gold in the first nine months of 2019 to just 52.8; that is, 48% less .
In China , the situation was not much better, going from 158.1 tons in September 2019 to 119.1 a year later, 25% less .
Technology
The technology sector has also been affected by the economic crisis derived from the pandemic. Its demand for gold at the end of the third quarter of 2020 fell by 6% year-on-year, to 76.7 tons .
Both the closures of industries forced by the control measures of the pandemic, as well as the reduction in spending by consumers, due to the economic crisis, have had a full impact on the sector and have reduced its consumption of gold.
Central Banks
In the case of central banks, the third quarter was an important milestone, since for the first time since 2011 they sold more gold than they bought, becoming net sellers (-12.1 Tm) .
However, from the World Gold Council they recall that the demand for the first three quarters of the year rises to 220.6 tons of gold and that the central banks will continue to be net buyers of gold in 2020 , although in less volume than the previous years.
Investment
The main beneficiary of the crisis situation generated by the pandemic has been the gold investment sector.
For the first time in history, the demand for investment gold has exceeded that of the jewelry sector: 494.6 tons, 21% more than at the end of the third quarter of 2019 and exceeding the 33 tons consumed by the jewelry sector.
Investors have launched into the purchase of gold bars and coins, whose sales figure (222.1 Tm) at the end of September exceeded that of the previous year by 49% and became the highest of all time.
Investment in gold ETFs also increased compared to the previous year, although by barely 5%, to 272.5 tons .
The change in the structure of the global demand for gold caused by the pandemic has resulted in a boost from the investment sector , which has taken over from the jewelry sector as the main consumer of the precious metal.
We will have to wait for the closing of the annual data to analyze the true impact of the coronavirus on the demand for gold.
Looking to the future, although it is foreseeable that the investment sector will continue to have a significant presence, it is logical that, as the economic recovery progresses, the jewelery sector will recover its strength.…
The Covid-19 pandemic has disrupted all areas of our lives in 2020, from the social to the economic. The precious metals market has not been an exception and, although it has benefited from the flight of investors towards a safe haven, it has also undergone significant changes. In this post we are going to explain how the structure of the global demand for gold has changed as a result of the pandemic.
As we have already explained from this blog, gold and silver have highlighted their status as refuge assets during the fateful year 2020.
A combination of favorable factors (low interest rates, the fall in the value of the dollar, the threat of rising inflation, uncertainty in the economic field and unprecedented measures in monetary and fiscal policy) has allowed them to appreciate 47% (silver) . and gain 24%, beating its historical maximum price (gold) .
Changes In Demand
However, the Covid-19 pandemic has had an impact on precious metals beyond the rise in their prices. The most striking effect, in terms of the gold market, has been the modification of the traditional structure of the demand for this precious metal.
During the last years, the distribution between the different sectors of the demand has barely changed. As can be seen in the attached graph, prepared by the World Gold Council , in the last decade the jewelery sector has accounted for most of the global demand for gold, with an average of more than 2,000 tons per year .
This demand is dominated by two Asian countries , China and India , where the gold jewelery sector is very powerful.
The second most important sector in terms of demand is investment , both physical (ingots and coins) and on paper (ETF) .
The third place in terms of global demand for gold has been disputed in recent years between the technology sector and the so-called official sector, that is, the central banks .
As can be seen in the graph, in 2010 the technology sector far exceeded the demand of central banks.
However, starting in 2011, the situation changed, as the official sector became a net buyer of gold for its reserves, driven by the significant rise in the metal that year.
Since then, central banks have stabilized as the third sector with the highest demand for gold, behind jewelry and investment.
The years 2018 and 2019 were the best of the decade for the official sector, which increased its gold reserves by more than 650 tons in each of those years.
The global outbreak of the coronavirus has altered the state of the economy on a global scale. The gold sector began to suffer this impact from the end of the first quarter of the year.
The restrictions on international transport and the closure of mines and refineries due to the pandemic control measures adopted by governments caused a veritable earthquake in the gold industry.
For the purposes of the lawsuit, the consequences were notable. According to the Gold Demand Trends report for the third quarter of the year, the latest published by the World Gold Council , demand from the jewelry sector plummeted, that of the technology sector and central banks fell, and that of the investment skyrocketed.
In the absence of data from the last quarter of 2020, the demand from the jewelry sector was barely 333 tons as of September 30, 30% less than on the same dates of the previous year.
The drop was very significant in India , whose jewelry sector went from consuming 101.6 tons of gold in the first nine months of 2019 to just 52.8; that is, 48% less .
In China , the situation was not much better, going from 158.1 tons in September 2019 to 119.1 a year later, 25% less .
Technology
The technology sector has also been affected by the economic crisis derived from the pandemic. Its demand for gold at the end of the third quarter of 2020 fell by 6% year-on-year, to 76.7 tons .
Both the closures of industries forced by the control measures of the pandemic, as well as the reduction in spending by consumers, due to the economic crisis, have had a full impact on the sector and have reduced its consumption of gold.
Central Banks
In the case of central banks, the third quarter was an important milestone, since for the first time since 2011 they sold more gold than they bought, becoming net sellers (-12.1 Tm) .
However, from the World Gold Council they recall that the demand for the first three quarters of the year rises to 220.6 tons of gold and that the central banks will continue to be net buyers of gold in 2020 , although in less volume than the previous years.
Investment
The main beneficiary of the crisis situation generated by the pandemic has been the gold investment sector.
For the first time in history, the demand for investment gold has exceeded that of the jewelry sector: 494.6 tons, 21% more than at the end of the third quarter of 2019 and exceeding the 33 tons consumed by the jewelry sector.
Investors have launched into the purchase of gold bars and coins, whose sales figure (222.1 Tm) at the end of September exceeded that of the previous year by 49% and became the highest of all time.
Investment in gold ETFs also increased compared to the previous year, although by barely 5%, to 272.5 tons .
The change in the structure of the global demand for gold caused by the pandemic has resulted in a boost from the investment sector , which has taken over from the jewelry sector as the main consumer of the precious metal.
We will have to wait for the closing of the annual data to analyze the true impact of the coronavirus on the demand for gold.
Looking to the future, although it is foreseeable that the investment sector will continue to have a significant presence, it is logical that, as the economic recovery progresses, the jewelery sector will recover its strength.…
)
[2] => Array
(
[title] => Gold As A Strategic Asset You Need To Have
[link] => https://goldandsilverira.reviews/gold-as-a-strategic-asset-you-need-to-have/
[dc] => Array
(
[creator] => John Blackwood
)
[pubdate] => Sun, 27 Nov 2022 10:28:42 +0000
[category] => Relevance of Gold
[guid] => https://goldandsilverira.reviews/?p=35
[description] =>
There is another aspect that we have not yet addressed, and that is fundamental for those who are interested in the world of investment: its role as a strategic asset and element of diversification in an investment portfolio.
Among the many qualities that gold has is that of offsetting and balancing the assets that are part of an investment portfolio, maintaining an inverse correlation with them. In this way, it can play the strategic role of minimizing losses or offsetting returns when other assets fall.
Given the many unknowns that hang over the future of investors, we are going to analyze in this post how it can benefit them to increase their exposure to the precious metal.
Threats Of The New Decade
The Covid-19 pandemic has further complicated a situation that was already difficult from an economic point of view.
Among the factors that characterize the new decade that is beginning now, the World Gold Council cites the following:
Low interest rates: Since the financial crisis of 2008, investors have had to deal with very low interest rates. Governments and central banks promote this policy of low interest rates to promote economic growth.
This drop in interest rates has a double effect on investors: on the one hand, it encourages them to look for assets with even greater risk, in order to achieve higher yields; on the other, it reduces the opportunity cost of owning gold and therefore encourages them to invest in the precious metal.
Geopolitical uncertainty: In recent times there have been pockets of instability that worry investors. Among the most relevant are Brexit, the deterioration of relations between the United States and China, the increase in protectionist policies that affect global demand.
All this harms the large European exporting economies, such as Germany, France, the Netherlands or Italy.
Generating Long-Term Returns
Historically, gold has generated long-term positive returns in both good times and bad.
The metal has appreciated by an annual average of 12% since 1971, when the gold standard ended. A return comparable to stocks and higher than treasury bonds. In addition, gold has outperformed other major assets over the past two decades, and is considered an excellent hedge against inflation (its 12% annual return since 1971 exceeds the European Consumer Price Index (CPI).
And at times when inflation has risen above 3%, its average return has been 15%.
Acting as a diversifying element and mitigating the losses of other assets in times of crisis.
Gold is distinguished by its negative correlation with stocks and other risky assets, as was highlighted during the 2008-2009 financial crisis.
At that time, stocks and other risk assets plummeted: hedge funds, real estate assets and most commodities, used as elements of investment portfolio diversification, also fell.
Instead, gold not only maintained, but also increased its price, rising 27% between December 2008 and December 2009.
Gold is especially effective in times of systemic risk, offering positive returns and reducing portfolio losses.
Providing liquidity without credit risk.
Gold has the advantage of its enormous liquidity compared to other assets, which are difficult to sell and are undervalued when liquidating. This is because its market is huge and global in scope.
According to estimates by the World Gold Council, the value of physical gold in the hands of investors and central bank
The metal is more liquid than German bonds and European stocks, and its trading volume is similar to that of US Treasuries.
In 2019, the daily volume of gold transactions was €136 billion. This guarantees liquidity that remains even in times of severe financial stress.
Improving the overall performance of the portfolio.
According to World Gold Council estimates, based on analysis of investment returns over the past 20 years, any portfolio would have achieved a higher return if it had been between 5 and 15% gold.
Furthermore, the impact would have been especially significant during the years of the global financial crisis. Although the decision to invest in gold rests with the investor or the portfolio manager, the truth is that the greater the risk of the same (in terms of volatility, illiquidity or concentration of assets), the greater amount of gold should be had to offset that risk.
Even if the average annual return of gold is reduced to 4-5% (much lower than today), its effect on returns is very significant. And this works both for investors with a risk profile and for those who prefer other more conservative assets such as real estate.…
There is another aspect that we have not yet addressed, and that is fundamental for those who are interested in the world of investment: its role as a strategic asset and element of diversification in an investment portfolio.
Among the many qualities that gold has is that of offsetting and balancing the assets that are part of an investment portfolio, maintaining an inverse correlation with them. In this way, it can play the strategic role of minimizing losses or offsetting returns when other assets fall.
Given the many unknowns that hang over the future of investors, we are going to analyze in this post how it can benefit them to increase their exposure to the precious metal.
Threats Of The New Decade
The Covid-19 pandemic has further complicated a situation that was already difficult from an economic point of view.
Among the factors that characterize the new decade that is beginning now, the World Gold Council cites the following:
Low interest rates: Since the financial crisis of 2008, investors have had to deal with very low interest rates. Governments and central banks promote this policy of low interest rates to promote economic growth.
This drop in interest rates has a double effect on investors: on the one hand, it encourages them to look for assets with even greater risk, in order to achieve higher yields; on the other, it reduces the opportunity cost of owning gold and therefore encourages them to invest in the precious metal.
Geopolitical uncertainty: In recent times there have been pockets of instability that worry investors. Among the most relevant are Brexit, the deterioration of relations between the United States and China, the increase in protectionist policies that affect global demand.
All this harms the large European exporting economies, such as Germany, France, the Netherlands or Italy.
Generating Long-Term Returns
Historically, gold has generated long-term positive returns in both good times and bad.
The metal has appreciated by an annual average of 12% since 1971, when the gold standard ended. A return comparable to stocks and higher than treasury bonds. In addition, gold has outperformed other major assets over the past two decades, and is considered an excellent hedge against inflation (its 12% annual return since 1971 exceeds the European Consumer Price Index (CPI).
And at times when inflation has risen above 3%, its average return has been 15%.
Acting as a diversifying element and mitigating the losses of other assets in times of crisis.
Gold is distinguished by its negative correlation with stocks and other risky assets, as was highlighted during the 2008-2009 financial crisis.
At that time, stocks and other risk assets plummeted: hedge funds, real estate assets and most commodities, used as elements of investment portfolio diversification, also fell.
Instead, gold not only maintained, but also increased its price, rising 27% between December 2008 and December 2009.
Gold is especially effective in times of systemic risk, offering positive returns and reducing portfolio losses.
Providing liquidity without credit risk.
Gold has the advantage of its enormous liquidity compared to other assets, which are difficult to sell and are undervalued when liquidating. This is because its market is huge and global in scope.
According to estimates by the World Gold Council, the value of physical gold in the hands of investors and central bank
The metal is more liquid than German bonds and European stocks, and its trading volume is similar to that of US Treasuries.
In 2019, the daily volume of gold transactions was €136 billion. This guarantees liquidity that remains even in times of severe financial stress.
Improving the overall performance of the portfolio.
According to World Gold Council estimates, based on analysis of investment returns over the past 20 years, any portfolio would have achieved a higher return if it had been between 5 and 15% gold.
Furthermore, the impact would have been especially significant during the years of the global financial crisis. Although the decision to invest in gold rests with the investor or the portfolio manager, the truth is that the greater the risk of the same (in terms of volatility, illiquidity or concentration of assets), the greater amount of gold should be had to offset that risk.
Even if the average annual return of gold is reduced to 4-5% (much lower than today), its effect on returns is very significant. And this works both for investors with a risk profile and for those who prefer other more conservative assets such as real estate.…
There is another aspect that we have not yet addressed, and that is fundamental for those who are interested in the world of investment: its role as a strategic asset and element of diversification in an investment portfolio.
Among the many qualities that gold has is that of offsetting and balancing the assets that are part of an investment portfolio, maintaining an inverse correlation with them. In this way, it can play the strategic role of minimizing losses or offsetting returns when other assets fall.
Given the many unknowns that hang over the future of investors, we are going to analyze in this post how it can benefit them to increase their exposure to the precious metal.
Threats Of The New Decade
The Covid-19 pandemic has further complicated a situation that was already difficult from an economic point of view.
Among the factors that characterize the new decade that is beginning now, the World Gold Council cites the following:
Low interest rates: Since the financial crisis of 2008, investors have had to deal with very low interest rates. Governments and central banks promote this policy of low interest rates to promote economic growth.
This drop in interest rates has a double effect on investors: on the one hand, it encourages them to look for assets with even greater risk, in order to achieve higher yields; on the other, it reduces the opportunity cost of owning gold and therefore encourages them to invest in the precious metal.
Geopolitical uncertainty: In recent times there have been pockets of instability that worry investors. Among the most relevant are Brexit, the deterioration of relations between the United States and China, the increase in protectionist policies that affect global demand.
All this harms the large European exporting economies, such as Germany, France, the Netherlands or Italy.
Generating Long-Term Returns
Historically, gold has generated long-term positive returns in both good times and bad.
The metal has appreciated by an annual average of 12% since 1971, when the gold standard ended. A return comparable to stocks and higher than treasury bonds. In addition, gold has outperformed other major assets over the past two decades, and is considered an excellent hedge against inflation (its 12% annual return since 1971 exceeds the European Consumer Price Index (CPI).
And at times when inflation has risen above 3%, its average return has been 15%.
Acting as a diversifying element and mitigating the losses of other assets in times of crisis.
Gold is distinguished by its negative correlation with stocks and other risky assets, as was highlighted during the 2008-2009 financial crisis.
At that time, stocks and other risk assets plummeted: hedge funds, real estate assets and most commodities, used as elements of investment portfolio diversification, also fell.
Instead, gold not only maintained, but also increased its price, rising 27% between December 2008 and December 2009.
Gold is especially effective in times of systemic risk, offering positive returns and reducing portfolio losses.
Providing liquidity without credit risk.
Gold has the advantage of its enormous liquidity compared to other assets, which are difficult to sell and are undervalued when liquidating. This is because its market is huge and global in scope.
According to estimates by the World Gold Council, the value of physical gold in the hands of investors and central bank
The metal is more liquid than German bonds and European stocks, and its trading volume is similar to that of US Treasuries.
In 2019, the daily volume of gold transactions was €136 billion. This guarantees liquidity that remains even in times of severe financial stress.
Improving the overall performance of the portfolio.
According to World Gold Council estimates, based on analysis of investment returns over the past 20 years, any portfolio would have achieved a higher return if it had been between 5 and 15% gold.
Furthermore, the impact would have been especially significant during the years of the global financial crisis. Although the decision to invest in gold rests with the investor or the portfolio manager, the truth is that the greater the risk of the same (in terms of volatility, illiquidity or concentration of assets), the greater amount of gold should be had to offset that risk.
Even if the average annual return of gold is reduced to 4-5% (much lower than today), its effect on returns is very significant. And this works both for investors with a risk profile and for those who prefer other more conservative assets such as real estate.…
There is another aspect that we have not yet addressed, and that is fundamental for those who are interested in the world of investment: its role as a strategic asset and element of diversification in an investment portfolio.
Among the many qualities that gold has is that of offsetting and balancing the assets that are part of an investment portfolio, maintaining an inverse correlation with them. In this way, it can play the strategic role of minimizing losses or offsetting returns when other assets fall.
Given the many unknowns that hang over the future of investors, we are going to analyze in this post how it can benefit them to increase their exposure to the precious metal.
Threats Of The New Decade
The Covid-19 pandemic has further complicated a situation that was already difficult from an economic point of view.
Among the factors that characterize the new decade that is beginning now, the World Gold Council cites the following:
Low interest rates: Since the financial crisis of 2008, investors have had to deal with very low interest rates. Governments and central banks promote this policy of low interest rates to promote economic growth.
This drop in interest rates has a double effect on investors: on the one hand, it encourages them to look for assets with even greater risk, in order to achieve higher yields; on the other, it reduces the opportunity cost of owning gold and therefore encourages them to invest in the precious metal.
Geopolitical uncertainty: In recent times there have been pockets of instability that worry investors. Among the most relevant are Brexit, the deterioration of relations between the United States and China, the increase in protectionist policies that affect global demand.
All this harms the large European exporting economies, such as Germany, France, the Netherlands or Italy.
Generating Long-Term Returns
Historically, gold has generated long-term positive returns in both good times and bad.
The metal has appreciated by an annual average of 12% since 1971, when the gold standard ended. A return comparable to stocks and higher than treasury bonds. In addition, gold has outperformed other major assets over the past two decades, and is considered an excellent hedge against inflation (its 12% annual return since 1971 exceeds the European Consumer Price Index (CPI).
And at times when inflation has risen above 3%, its average return has been 15%.
Acting as a diversifying element and mitigating the losses of other assets in times of crisis.
Gold is distinguished by its negative correlation with stocks and other risky assets, as was highlighted during the 2008-2009 financial crisis.
At that time, stocks and other risk assets plummeted: hedge funds, real estate assets and most commodities, used as elements of investment portfolio diversification, also fell.
Instead, gold not only maintained, but also increased its price, rising 27% between December 2008 and December 2009.
Gold is especially effective in times of systemic risk, offering positive returns and reducing portfolio losses.
Providing liquidity without credit risk.
Gold has the advantage of its enormous liquidity compared to other assets, which are difficult to sell and are undervalued when liquidating. This is because its market is huge and global in scope.
According to estimates by the World Gold Council, the value of physical gold in the hands of investors and central bank
The metal is more liquid than German bonds and European stocks, and its trading volume is similar to that of US Treasuries.
In 2019, the daily volume of gold transactions was €136 billion. This guarantees liquidity that remains even in times of severe financial stress.
Improving the overall performance of the portfolio.
According to World Gold Council estimates, based on analysis of investment returns over the past 20 years, any portfolio would have achieved a higher return if it had been between 5 and 15% gold.
Furthermore, the impact would have been especially significant during the years of the global financial crisis. Although the decision to invest in gold rests with the investor or the portfolio manager, the truth is that the greater the risk of the same (in terms of volatility, illiquidity or concentration of assets), the greater amount of gold should be had to offset that risk.
Even if the average annual return of gold is reduced to 4-5% (much lower than today), its effect on returns is very significant. And this works both for investors with a risk profile and for those who prefer other more conservative assets such as real estate.…
)
[3] => Array
(
[title] => How Does Gold Affect International Currencies?
[link] => https://goldandsilverira.reviews/how-does-gold-affect-international-currencies/
[dc] => Array
(
[creator] => John Blackwood
)
[pubdate] => Sat, 26 Nov 2022 10:30:45 +0000
[category] => Gold Affects Currencies
[guid] => https://goldandsilverira.reviews/?p=38
[description] =>
Gold and money have had a close relationship for thousands of years. So close that, for many centuries, they were the same: gold was used to pay for goods and services. Subsequently, money was born that, at first, was backed by the precious metal. But even when gold stopped supporting so-called fiat money, its influence on international currencies is very important. In this post we are going to explain how gold affects these currencies.
For hundreds of years, gold was used by men as a means of payment: first, in the form of dust or nuggets and, later, as coins minted by the mints of different kingdoms.
The appearance of local currencies and banknotes, which for many years were backed by gold itself, changed the concept of money.
This evolved until it was no longer backed by gold and based on the trust of citizens in the state that issued it. That is why current currencies are called ‘fiat’ money , that is, based on trust.
However, gold has never ceased to exert its influence on the value of world currencies. In fact, there is an important correlation between its value and the strength of the currencies that are quoted in the international markets.
As explained by Investopedia , to understand the relationship between gold and international currencies, five characteristics of the precious metal must be taken into account:
Gold was used for centuries to back currencies
Precious metals were used to mint legal tender coins from the 6th century BC. C., a system that worked for many centuries.
However, paper money, that is, money backed by gold or silver, did not appear until the 9th century in China, when bills began to be used as promissory notes, which were backed by the number of pieces of gold or silver that was stipulated in them. In this way, merchants could transport money more comfortably and safely.
This formula spread to various states, empires and kingdoms, which began to support the currency they issued with precious metals. The system was established internationally in the 19th century and continued to function, with a fixed exchange rate, until the aftermath of World War I led to the currency crisis and hyperinflation of the Weimar Republic in the 1920s (see image). and the Great Depression of 1929 .
When the Second World War was about to end, in July 1944, representatives of 44 countries met at Bretton Woods (New Hampshire, USA) , to bring to light the agreements of the same name, which established the dollar as the international exchange currency, with a convertibility in gold at a rate of 35 dollars an ounce.
This system worked until 1971, when President Richard Nixon ended the convertibility of the dollar into gold, due to the enormous expense derived from the Vietnam War and the scarcity of precious metal in the United States reserves.
Until then, the states could not print all the banknotes they wanted, since they had to be backed by the same amount of gold, deposited in the national reserves.
Since direct convertibility ended and they based their currencies on the trust of citizens, countries have been tempted to print more banknotes when they need financing, which has triggered inflation.
Gold is a hedge against inflation
Precious metals, and gold in particular, are considered the best hedges against inflation: investors tend to buy large amounts of gold when the economy hits high levels of inflation.
The precious metal has a greater capacity than any other asset to retain value, as we saw in another post on this blog, dedicated to stores of value .
In April 2011, for example, the fall in the value of fiat currencies spooked investors into buying gold, sending its price up to $1,550 an ounce.
This bet on gold indicated low investor confidence in world currencies and instability in the global economy.
The price of gold affects the countries that import and export it
The value of a nation’s currency is strongly linked to the value of its imports and exports. Thus, when a country imports more than it exports, the value of its currency falls.
On the other hand, the value of its currency increases when the country is a net exporter, that is, it exports more than it imports.
For this reason, countries that export gold or have access to gold reserves will see their currency become stronger when the price of gold rises, since this means that the value of the country’s total exports increases.
In this way, an increase in the price of gold can cause a trade surplus or help to cover a deficit.
Conversely, countries that specialize in the manufacture of gold products but have no production of their own (such as India, which has come to import more than 900 tons of metal per year) will inevitably end up with a much weaker currency when raise the price of gold, as they become net importers.
Buying gold tends to reduce the value of the currency used to buy it
As explained by Investopedia, when central banks buy gold, it affects the supply and demand of the local currency and, ultimately, can cause an increase in inflation.
This is because central banks rely more on printing money than increasing their gold reserves, which creates an oversupply of the local currency, which depreciates against other currencies.
The price of gold is used to measure the value of a local currency
Gold has been mistakenly used as an indicator to measure the value of a country’s currency. While there is undoubtedly a relationship between the price of gold and the value of a fiat currency, it is not always an inverse relationship, as is often believed.
For example, if there is significant demand from an industry that requires gold as a raw material, this will cause the price of the metal to rise. But this has nothing to do with the local currency which, at the same time, can be highly valued.
As they explain from Investopedia, gold has a profound impact on the value of world currencies. Even after the so-called ‘gold standard’ is abandoned , the precious metal can replace fiat currencies and act as a hedge against inflation.
Without a doubt, gold will continue to play an important role in the international currency markets. The world’s central banks continue to rely on it to form part of their reserves. In fact, in the case of some like the US Federal Reserve , gold constitutes almost 80% of them.
The confidence of international central banks in gold is growing: a recent Central Banking survey among representatives of 26 central banks around the world reveals that 62% of them are willing to increase their gold reserves in the next 12 months.
And above all, we must not lose sight of the fact that, in times of economic crisis, currency devaluation or hyperinflation, whoever has gold at hand truly has a treasure.…
Gold and money have had a close relationship for thousands of years. So close that, for many centuries, they were the same: gold was used to pay for goods and services. Subsequently, money was born that, at first, was backed by the precious metal. But even when gold stopped supporting so-called fiat money, its influence on international currencies is very important. In this post we are going to explain how gold affects these currencies.
For hundreds of years, gold was used by men as a means of payment: first, in the form of dust or nuggets and, later, as coins minted by the mints of different kingdoms.
The appearance of local currencies and banknotes, which for many years were backed by gold itself, changed the concept of money.
This evolved until it was no longer backed by gold and based on the trust of citizens in the state that issued it. That is why current currencies are called ‘fiat’ money , that is, based on trust.
However, gold has never ceased to exert its influence on the value of world currencies. In fact, there is an important correlation between its value and the strength of the currencies that are quoted in the international markets.
As explained by Investopedia , to understand the relationship between gold and international currencies, five characteristics of the precious metal must be taken into account:
Gold was used for centuries to back currencies
Precious metals were used to mint legal tender coins from the 6th century BC. C., a system that worked for many centuries.
However, paper money, that is, money backed by gold or silver, did not appear until the 9th century in China, when bills began to be used as promissory notes, which were backed by the number of pieces of gold or silver that was stipulated in them. In this way, merchants could transport money more comfortably and safely.
This formula spread to various states, empires and kingdoms, which began to support the currency they issued with precious metals. The system was established internationally in the 19th century and continued to function, with a fixed exchange rate, until the aftermath of World War I led to the currency crisis and hyperinflation of the Weimar Republic in the 1920s (see image). and the Great Depression of 1929 .
When the Second World War was about to end, in July 1944, representatives of 44 countries met at Bretton Woods (New Hampshire, USA) , to bring to light the agreements of the same name, which established the dollar as the international exchange currency, with a convertibility in gold at a rate of 35 dollars an ounce.
This system worked until 1971, when President Richard Nixon ended the convertibility of the dollar into gold, due to the enormous expense derived from the Vietnam War and the scarcity of precious metal in the United States reserves.
Until then, the states could not print all the banknotes they wanted, since they had to be backed by the same amount of gold, deposited in the national reserves.
Since direct convertibility ended and they based their currencies on the trust of citizens, countries have been tempted to print more banknotes when they need financing, which has triggered inflation.
Gold is a hedge against inflation
Precious metals, and gold in particular, are considered the best hedges against inflation: investors tend to buy large amounts of gold when the economy hits high levels of inflation.
The precious metal has a greater capacity than any other asset to retain value, as we saw in another post on this blog, dedicated to stores of value .
In April 2011, for example, the fall in the value of fiat currencies spooked investors into buying gold, sending its price up to $1,550 an ounce.
This bet on gold indicated low investor confidence in world currencies and instability in the global economy.
The price of gold affects the countries that import and export it
The value of a nation’s currency is strongly linked to the value of its imports and exports. Thus, when a country imports more than it exports, the value of its currency falls.
On the other hand, the value of its currency increases when the country is a net exporter, that is, it exports more than it imports.
For this reason, countries that export gold or have access to gold reserves will see their currency become stronger when the price of gold rises, since this means that the value of the country’s total exports increases.
In this way, an increase in the price of gold can cause a trade surplus or help to cover a deficit.
Conversely, countries that specialize in the manufacture of gold products but have no production of their own (such as India, which has come to import more than 900 tons of metal per year) will inevitably end up with a much weaker currency when raise the price of gold, as they become net importers.
Buying gold tends to reduce the value of the currency used to buy it
As explained by Investopedia, when central banks buy gold, it affects the supply and demand of the local currency and, ultimately, can cause an increase in inflation.
This is because central banks rely more on printing money than increasing their gold reserves, which creates an oversupply of the local currency, which depreciates against other currencies.
The price of gold is used to measure the value of a local currency
Gold has been mistakenly used as an indicator to measure the value of a country’s currency. While there is undoubtedly a relationship between the price of gold and the value of a fiat currency, it is not always an inverse relationship, as is often believed.
For example, if there is significant demand from an industry that requires gold as a raw material, this will cause the price of the metal to rise. But this has nothing to do with the local currency which, at the same time, can be highly valued.
As they explain from Investopedia, gold has a profound impact on the value of world currencies. Even after the so-called ‘gold standard’ is abandoned , the precious metal can replace fiat currencies and act as a hedge against inflation.
Without a doubt, gold will continue to play an important role in the international currency markets. The world’s central banks continue to rely on it to form part of their reserves. In fact, in the case of some like the US Federal Reserve , gold constitutes almost 80% of them.
The confidence of international central banks in gold is growing: a recent Central Banking survey among representatives of 26 central banks around the world reveals that 62% of them are willing to increase their gold reserves in the next 12 months.
And above all, we must not lose sight of the fact that, in times of economic crisis, currency devaluation or hyperinflation, whoever has gold at hand truly has a treasure.…
Gold and money have had a close relationship for thousands of years. So close that, for many centuries, they were the same: gold was used to pay for goods and services. Subsequently, money was born that, at first, was backed by the precious metal. But even when gold stopped supporting so-called fiat money, its influence on international currencies is very important. In this post we are going to explain how gold affects these currencies.
For hundreds of years, gold was used by men as a means of payment: first, in the form of dust or nuggets and, later, as coins minted by the mints of different kingdoms.
The appearance of local currencies and banknotes, which for many years were backed by gold itself, changed the concept of money.
This evolved until it was no longer backed by gold and based on the trust of citizens in the state that issued it. That is why current currencies are called ‘fiat’ money , that is, based on trust.
However, gold has never ceased to exert its influence on the value of world currencies. In fact, there is an important correlation between its value and the strength of the currencies that are quoted in the international markets.
As explained by Investopedia , to understand the relationship between gold and international currencies, five characteristics of the precious metal must be taken into account:
Gold was used for centuries to back currencies
Precious metals were used to mint legal tender coins from the 6th century BC. C., a system that worked for many centuries.
However, paper money, that is, money backed by gold or silver, did not appear until the 9th century in China, when bills began to be used as promissory notes, which were backed by the number of pieces of gold or silver that was stipulated in them. In this way, merchants could transport money more comfortably and safely.
This formula spread to various states, empires and kingdoms, which began to support the currency they issued with precious metals. The system was established internationally in the 19th century and continued to function, with a fixed exchange rate, until the aftermath of World War I led to the currency crisis and hyperinflation of the Weimar Republic in the 1920s (see image). and the Great Depression of 1929 .
When the Second World War was about to end, in July 1944, representatives of 44 countries met at Bretton Woods (New Hampshire, USA) , to bring to light the agreements of the same name, which established the dollar as the international exchange currency, with a convertibility in gold at a rate of 35 dollars an ounce.
This system worked until 1971, when President Richard Nixon ended the convertibility of the dollar into gold, due to the enormous expense derived from the Vietnam War and the scarcity of precious metal in the United States reserves.
Until then, the states could not print all the banknotes they wanted, since they had to be backed by the same amount of gold, deposited in the national reserves.
Since direct convertibility ended and they based their currencies on the trust of citizens, countries have been tempted to print more banknotes when they need financing, which has triggered inflation.
Gold is a hedge against inflation
Precious metals, and gold in particular, are considered the best hedges against inflation: investors tend to buy large amounts of gold when the economy hits high levels of inflation.
The precious metal has a greater capacity than any other asset to retain value, as we saw in another post on this blog, dedicated to stores of value .
In April 2011, for example, the fall in the value of fiat currencies spooked investors into buying gold, sending its price up to $1,550 an ounce.
This bet on gold indicated low investor confidence in world currencies and instability in the global economy.
The price of gold affects the countries that import and export it
The value of a nation’s currency is strongly linked to the value of its imports and exports. Thus, when a country imports more than it exports, the value of its currency falls.
On the other hand, the value of its currency increases when the country is a net exporter, that is, it exports more than it imports.
For this reason, countries that export gold or have access to gold reserves will see their currency become stronger when the price of gold rises, since this means that the value of the country’s total exports increases.
In this way, an increase in the price of gold can cause a trade surplus or help to cover a deficit.
Conversely, countries that specialize in the manufacture of gold products but have no production of their own (such as India, which has come to import more than 900 tons of metal per year) will inevitably end up with a much weaker currency when raise the price of gold, as they become net importers.
Buying gold tends to reduce the value of the currency used to buy it
As explained by Investopedia, when central banks buy gold, it affects the supply and demand of the local currency and, ultimately, can cause an increase in inflation.
This is because central banks rely more on printing money than increasing their gold reserves, which creates an oversupply of the local currency, which depreciates against other currencies.
The price of gold is used to measure the value of a local currency
Gold has been mistakenly used as an indicator to measure the value of a country’s currency. While there is undoubtedly a relationship between the price of gold and the value of a fiat currency, it is not always an inverse relationship, as is often believed.
For example, if there is significant demand from an industry that requires gold as a raw material, this will cause the price of the metal to rise. But this has nothing to do with the local currency which, at the same time, can be highly valued.
As they explain from Investopedia, gold has a profound impact on the value of world currencies. Even after the so-called ‘gold standard’ is abandoned , the precious metal can replace fiat currencies and act as a hedge against inflation.
Without a doubt, gold will continue to play an important role in the international currency markets. The world’s central banks continue to rely on it to form part of their reserves. In fact, in the case of some like the US Federal Reserve , gold constitutes almost 80% of them.
The confidence of international central banks in gold is growing: a recent Central Banking survey among representatives of 26 central banks around the world reveals that 62% of them are willing to increase their gold reserves in the next 12 months.
And above all, we must not lose sight of the fact that, in times of economic crisis, currency devaluation or hyperinflation, whoever has gold at hand truly has a treasure.…
Gold and money have had a close relationship for thousands of years. So close that, for many centuries, they were the same: gold was used to pay for goods and services. Subsequently, money was born that, at first, was backed by the precious metal. But even when gold stopped supporting so-called fiat money, its influence on international currencies is very important. In this post we are going to explain how gold affects these currencies.
For hundreds of years, gold was used by men as a means of payment: first, in the form of dust or nuggets and, later, as coins minted by the mints of different kingdoms.
The appearance of local currencies and banknotes, which for many years were backed by gold itself, changed the concept of money.
This evolved until it was no longer backed by gold and based on the trust of citizens in the state that issued it. That is why current currencies are called ‘fiat’ money , that is, based on trust.
However, gold has never ceased to exert its influence on the value of world currencies. In fact, there is an important correlation between its value and the strength of the currencies that are quoted in the international markets.
As explained by Investopedia , to understand the relationship between gold and international currencies, five characteristics of the precious metal must be taken into account:
Gold was used for centuries to back currencies
Precious metals were used to mint legal tender coins from the 6th century BC. C., a system that worked for many centuries.
However, paper money, that is, money backed by gold or silver, did not appear until the 9th century in China, when bills began to be used as promissory notes, which were backed by the number of pieces of gold or silver that was stipulated in them. In this way, merchants could transport money more comfortably and safely.
This formula spread to various states, empires and kingdoms, which began to support the currency they issued with precious metals. The system was established internationally in the 19th century and continued to function, with a fixed exchange rate, until the aftermath of World War I led to the currency crisis and hyperinflation of the Weimar Republic in the 1920s (see image). and the Great Depression of 1929 .
When the Second World War was about to end, in July 1944, representatives of 44 countries met at Bretton Woods (New Hampshire, USA) , to bring to light the agreements of the same name, which established the dollar as the international exchange currency, with a convertibility in gold at a rate of 35 dollars an ounce.
This system worked until 1971, when President Richard Nixon ended the convertibility of the dollar into gold, due to the enormous expense derived from the Vietnam War and the scarcity of precious metal in the United States reserves.
Until then, the states could not print all the banknotes they wanted, since they had to be backed by the same amount of gold, deposited in the national reserves.
Since direct convertibility ended and they based their currencies on the trust of citizens, countries have been tempted to print more banknotes when they need financing, which has triggered inflation.
Gold is a hedge against inflation
Precious metals, and gold in particular, are considered the best hedges against inflation: investors tend to buy large amounts of gold when the economy hits high levels of inflation.
The precious metal has a greater capacity than any other asset to retain value, as we saw in another post on this blog, dedicated to stores of value .
In April 2011, for example, the fall in the value of fiat currencies spooked investors into buying gold, sending its price up to $1,550 an ounce.
This bet on gold indicated low investor confidence in world currencies and instability in the global economy.
The price of gold affects the countries that import and export it
The value of a nation’s currency is strongly linked to the value of its imports and exports. Thus, when a country imports more than it exports, the value of its currency falls.
On the other hand, the value of its currency increases when the country is a net exporter, that is, it exports more than it imports.
For this reason, countries that export gold or have access to gold reserves will see their currency become stronger when the price of gold rises, since this means that the value of the country’s total exports increases.
In this way, an increase in the price of gold can cause a trade surplus or help to cover a deficit.
Conversely, countries that specialize in the manufacture of gold products but have no production of their own (such as India, which has come to import more than 900 tons of metal per year) will inevitably end up with a much weaker currency when raise the price of gold, as they become net importers.
Buying gold tends to reduce the value of the currency used to buy it
As explained by Investopedia, when central banks buy gold, it affects the supply and demand of the local currency and, ultimately, can cause an increase in inflation.
This is because central banks rely more on printing money than increasing their gold reserves, which creates an oversupply of the local currency, which depreciates against other currencies.
The price of gold is used to measure the value of a local currency
Gold has been mistakenly used as an indicator to measure the value of a country’s currency. While there is undoubtedly a relationship between the price of gold and the value of a fiat currency, it is not always an inverse relationship, as is often believed.
For example, if there is significant demand from an industry that requires gold as a raw material, this will cause the price of the metal to rise. But this has nothing to do with the local currency which, at the same time, can be highly valued.
As they explain from Investopedia, gold has a profound impact on the value of world currencies. Even after the so-called ‘gold standard’ is abandoned , the precious metal can replace fiat currencies and act as a hedge against inflation.
Without a doubt, gold will continue to play an important role in the international currency markets. The world’s central banks continue to rely on it to form part of their reserves. In fact, in the case of some like the US Federal Reserve , gold constitutes almost 80% of them.
The confidence of international central banks in gold is growing: a recent Central Banking survey among representatives of 26 central banks around the world reveals that 62% of them are willing to increase their gold reserves in the next 12 months.
And above all, we must not lose sight of the fact that, in times of economic crisis, currency devaluation or hyperinflation, whoever has gold at hand truly has a treasure.…
)
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[title] => Gold As A Hedge Against Inflation: Know What It Is!
[link] => https://goldandsilverira.reviews/gold-as-a-hedge-against-inflation-know-what-it-is/
[dc] => Array
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[creator] => John Blackwood
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[pubdate] => Fri, 25 Nov 2022 10:32:57 +0000
[category] => Inflation Hedge
[guid] => https://goldandsilverira.reviews/?p=40
[description] =>
Inflation is one of the economic terms most feared by consumers. It means that they can purchase fewer goods and services with their money and, therefore, lose purchasing power and quality of life. One of the fears of the current economic situation is the forecast of a rise in inflation. Before her, gold is also presented as an essential element of protection. In this post we are going to see what inflation is, what is expected for the coming years and how gold can help reduce its impact on our economies.
The economic crisis caused by the Covid-19 pandemic has brought many unintended consequences: business and company closures, increased unemployment, reduced consumption, decreased imports and exports.
Analysts warn of a possible rise in inflation as a result of the current situation of the global economy and the measures that governments and central banks are adopting to deal with it.
What is inflation?
Inflation is called the general and sustained increase in the prices of goods and services in a country during a certain period of time, which is usually one year.
This means that, with the same monetary unit, fewer goods and services can be purchased. Therefore, inflation is the visible effect caused by the devaluation of the currency.
To measure it, the growth in the prices of a weighted basket of goods is used. The index that measures its annual variation is the Consumer Price Index (CPI) .
Its causes are multiple: increase in the price of raw materials, in the demand for goods, forecast rise in prices.
There are different levels of inflation: it can be moderate (less than 10% per year); galloping (of two or three digits); or hyperinflation (over 50% per month, that is, close to 13,000% per year).
To combat it, interest rates for consumption are usually increased, which discourages consumption and, therefore, discourages consumers from acquiring more goods and services than are strictly necessary.
The problem is that this reduction in consumption also affects the industry that produces the goods, which can lead to economic stagnation and increased unemployment.
The actual situation
According to a recent report by the Luxembourg consultancy Incrementum , “the current monetary policy and the change in investor objectives is sowing the seeds of a new inflationary paradigm. This seed is flourishing now thanks to the Covid-19 crisis .
For its part, the fund manager Midas Funds recalls that the US debt is already close to 27 trillion dollars, which represents 143% of GDP: “of all the likely scenarios, a rise in inflation is the easier . “
Although inflation levels are not expected to reach those of the 1970s, Midas Funds analysts believe that with interest rates as low as they are today, inflation will not need to rise much to affect the purchasing power of consumers.
Gold as a hedge against inflation
Faced with an environment of growing inflation, with the devaluation of the currency and the loss of purchasing power on the part of consumers as the main consequences, investors (and consumers themselves) must seek means to protect their assets against the threat.
According to the World Gold Council :
“commodities are often used as diversification elements during periods of high inflation. While it is true that they have performed well during these inflationary periods, gold has done even better. And in periods of low inflation, commodities have had negative nominal returns, while gold has registered a positive appreciation .
From Midas Funds they agree that, in an inflationary environment, gold will continue to shine as an alternative asset that can preserve investors’ assets: “if you want to preserve capital, gold has historically been the best way to do it” .
The consulting firm Incrementum describes, in its report, the advantages that gold has as a store of value in an environment of high inflation:
It allows the diversification of the portfolio of the investment portfolio, since its correlation with other assets is on average 0.1.
It constitutes an effective protection against the so-called ‘tail risks’ or ‘tail risks’, which refer to events that have little chance of occurring and that affect an investment portfolio.
It is an asset with great liquidity , greater than that of German and US bonds, and than stocks.
It protects the investment portfolio in times of rising inflation and strong deflation .
Protects against currency devaluation risk as it is inversely correlated with fiat currencies, especially the US dollar.
“Its relative scarcity is the main advantage of gold compared to fiat currencies. Gold is essentially immune to inflation, due to its scarcity. Therefore, it makes sense to include it in the investment portfolio as an element of protection against inflation, while the global economy is heading inexorably towards an unprecedented monetary swamp” , they conclude from the Luxembourg consultancy.
Inflation is one of the economic terms most feared by consumers. It means that they can purchase fewer goods and services with their money and, therefore, lose purchasing power and quality of life. One of the fears of the current economic situation is the forecast of a rise in inflation. Before her, gold is also presented as an essential element of protection. In this post we are going to see what inflation is, what is expected for the coming years and how gold can help reduce its impact on our economies.
The economic crisis caused by the Covid-19 pandemic has brought many unintended consequences: business and company closures, increased unemployment, reduced consumption, decreased imports and exports.
Analysts warn of a possible rise in inflation as a result of the current situation of the global economy and the measures that governments and central banks are adopting to deal with it.
What is inflation?
Inflation is called the general and sustained increase in the prices of goods and services in a country during a certain period of time, which is usually one year.
This means that, with the same monetary unit, fewer goods and services can be purchased. Therefore, inflation is the visible effect caused by the devaluation of the currency.
To measure it, the growth in the prices of a weighted basket of goods is used. The index that measures its annual variation is the Consumer Price Index (CPI) .
Its causes are multiple: increase in the price of raw materials, in the demand for goods, forecast rise in prices.
There are different levels of inflation: it can be moderate (less than 10% per year); galloping (of two or three digits); or hyperinflation (over 50% per month, that is, close to 13,000% per year).
To combat it, interest rates for consumption are usually increased, which discourages consumption and, therefore, discourages consumers from acquiring more goods and services than are strictly necessary.
The problem is that this reduction in consumption also affects the industry that produces the goods, which can lead to economic stagnation and increased unemployment.
The actual situation
According to a recent report by the Luxembourg consultancy Incrementum , “the current monetary policy and the change in investor objectives is sowing the seeds of a new inflationary paradigm. This seed is flourishing now thanks to the Covid-19 crisis .
For its part, the fund manager Midas Funds recalls that the US debt is already close to 27 trillion dollars, which represents 143% of GDP: “of all the likely scenarios, a rise in inflation is the easier . “
Although inflation levels are not expected to reach those of the 1970s, Midas Funds analysts believe that with interest rates as low as they are today, inflation will not need to rise much to affect the purchasing power of consumers.
Gold as a hedge against inflation
Faced with an environment of growing inflation, with the devaluation of the currency and the loss of purchasing power on the part of consumers as the main consequences, investors (and consumers themselves) must seek means to protect their assets against the threat.
According to the World Gold Council :
“commodities are often used as diversification elements during periods of high inflation. While it is true that they have performed well during these inflationary periods, gold has done even better. And in periods of low inflation, commodities have had negative nominal returns, while gold has registered a positive appreciation .
From Midas Funds they agree that, in an inflationary environment, gold will continue to shine as an alternative asset that can preserve investors’ assets: “if you want to preserve capital, gold has historically been the best way to do it” .
The consulting firm Incrementum describes, in its report, the advantages that gold has as a store of value in an environment of high inflation:
It allows the diversification of the portfolio of the investment portfolio, since its correlation with other assets is on average 0.1.
It constitutes an effective protection against the so-called ‘tail risks’ or ‘tail risks’, which refer to events that have little chance of occurring and that affect an investment portfolio.
It is an asset with great liquidity , greater than that of German and US bonds, and than stocks.
It protects the investment portfolio in times of rising inflation and strong deflation .
Protects against currency devaluation risk as it is inversely correlated with fiat currencies, especially the US dollar.
“Its relative scarcity is the main advantage of gold compared to fiat currencies. Gold is essentially immune to inflation, due to its scarcity. Therefore, it makes sense to include it in the investment portfolio as an element of protection against inflation, while the global economy is heading inexorably towards an unprecedented monetary swamp” , they conclude from the Luxembourg consultancy.
Inflation is one of the economic terms most feared by consumers. It means that they can purchase fewer goods and services with their money and, therefore, lose purchasing power and quality of life. One of the fears of the current economic situation is the forecast of a rise in inflation. Before her, gold is also presented as an essential element of protection. In this post we are going to see what inflation is, what is expected for the coming years and how gold can help reduce its impact on our economies.
The economic crisis caused by the Covid-19 pandemic has brought many unintended consequences: business and company closures, increased unemployment, reduced consumption, decreased imports and exports.
Analysts warn of a possible rise in inflation as a result of the current situation of the global economy and the measures that governments and central banks are adopting to deal with it.
What is inflation?
Inflation is called the general and sustained increase in the prices of goods and services in a country during a certain period of time, which is usually one year.
This means that, with the same monetary unit, fewer goods and services can be purchased. Therefore, inflation is the visible effect caused by the devaluation of the currency.
To measure it, the growth in the prices of a weighted basket of goods is used. The index that measures its annual variation is the Consumer Price Index (CPI) .
Its causes are multiple: increase in the price of raw materials, in the demand for goods, forecast rise in prices.
There are different levels of inflation: it can be moderate (less than 10% per year); galloping (of two or three digits); or hyperinflation (over 50% per month, that is, close to 13,000% per year).
To combat it, interest rates for consumption are usually increased, which discourages consumption and, therefore, discourages consumers from acquiring more goods and services than are strictly necessary.
The problem is that this reduction in consumption also affects the industry that produces the goods, which can lead to economic stagnation and increased unemployment.
The actual situation
According to a recent report by the Luxembourg consultancy Incrementum , “the current monetary policy and the change in investor objectives is sowing the seeds of a new inflationary paradigm. This seed is flourishing now thanks to the Covid-19 crisis .
For its part, the fund manager Midas Funds recalls that the US debt is already close to 27 trillion dollars, which represents 143% of GDP: “of all the likely scenarios, a rise in inflation is the easier . “
Although inflation levels are not expected to reach those of the 1970s, Midas Funds analysts believe that with interest rates as low as they are today, inflation will not need to rise much to affect the purchasing power of consumers.
Gold as a hedge against inflation
Faced with an environment of growing inflation, with the devaluation of the currency and the loss of purchasing power on the part of consumers as the main consequences, investors (and consumers themselves) must seek means to protect their assets against the threat.
According to the World Gold Council :
“commodities are often used as diversification elements during periods of high inflation. While it is true that they have performed well during these inflationary periods, gold has done even better. And in periods of low inflation, commodities have had negative nominal returns, while gold has registered a positive appreciation .
From Midas Funds they agree that, in an inflationary environment, gold will continue to shine as an alternative asset that can preserve investors’ assets: “if you want to preserve capital, gold has historically been the best way to do it” .
The consulting firm Incrementum describes, in its report, the advantages that gold has as a store of value in an environment of high inflation:
It allows the diversification of the portfolio of the investment portfolio, since its correlation with other assets is on average 0.1.
It constitutes an effective protection against the so-called ‘tail risks’ or ‘tail risks’, which refer to events that have little chance of occurring and that affect an investment portfolio.
It is an asset with great liquidity , greater than that of German and US bonds, and than stocks.
It protects the investment portfolio in times of rising inflation and strong deflation .
Protects against currency devaluation risk as it is inversely correlated with fiat currencies, especially the US dollar.
“Its relative scarcity is the main advantage of gold compared to fiat currencies. Gold is essentially immune to inflation, due to its scarcity. Therefore, it makes sense to include it in the investment portfolio as an element of protection against inflation, while the global economy is heading inexorably towards an unprecedented monetary swamp” , they conclude from the Luxembourg consultancy.
Inflation is one of the economic terms most feared by consumers. It means that they can purchase fewer goods and services with their money and, therefore, lose purchasing power and quality of life. One of the fears of the current economic situation is the forecast of a rise in inflation. Before her, gold is also presented as an essential element of protection. In this post we are going to see what inflation is, what is expected for the coming years and how gold can help reduce its impact on our economies.
The economic crisis caused by the Covid-19 pandemic has brought many unintended consequences: business and company closures, increased unemployment, reduced consumption, decreased imports and exports.
Analysts warn of a possible rise in inflation as a result of the current situation of the global economy and the measures that governments and central banks are adopting to deal with it.
What is inflation?
Inflation is called the general and sustained increase in the prices of goods and services in a country during a certain period of time, which is usually one year.
This means that, with the same monetary unit, fewer goods and services can be purchased. Therefore, inflation is the visible effect caused by the devaluation of the currency.
To measure it, the growth in the prices of a weighted basket of goods is used. The index that measures its annual variation is the Consumer Price Index (CPI) .
Its causes are multiple: increase in the price of raw materials, in the demand for goods, forecast rise in prices.
There are different levels of inflation: it can be moderate (less than 10% per year); galloping (of two or three digits); or hyperinflation (over 50% per month, that is, close to 13,000% per year).
To combat it, interest rates for consumption are usually increased, which discourages consumption and, therefore, discourages consumers from acquiring more goods and services than are strictly necessary.
The problem is that this reduction in consumption also affects the industry that produces the goods, which can lead to economic stagnation and increased unemployment.
The actual situation
According to a recent report by the Luxembourg consultancy Incrementum , “the current monetary policy and the change in investor objectives is sowing the seeds of a new inflationary paradigm. This seed is flourishing now thanks to the Covid-19 crisis .
For its part, the fund manager Midas Funds recalls that the US debt is already close to 27 trillion dollars, which represents 143% of GDP: “of all the likely scenarios, a rise in inflation is the easier . “
Although inflation levels are not expected to reach those of the 1970s, Midas Funds analysts believe that with interest rates as low as they are today, inflation will not need to rise much to affect the purchasing power of consumers.
Gold as a hedge against inflation
Faced with an environment of growing inflation, with the devaluation of the currency and the loss of purchasing power on the part of consumers as the main consequences, investors (and consumers themselves) must seek means to protect their assets against the threat.
According to the World Gold Council :
“commodities are often used as diversification elements during periods of high inflation. While it is true that they have performed well during these inflationary periods, gold has done even better. And in periods of low inflation, commodities have had negative nominal returns, while gold has registered a positive appreciation .
From Midas Funds they agree that, in an inflationary environment, gold will continue to shine as an alternative asset that can preserve investors’ assets: “if you want to preserve capital, gold has historically been the best way to do it” .
The consulting firm Incrementum describes, in its report, the advantages that gold has as a store of value in an environment of high inflation:
It allows the diversification of the portfolio of the investment portfolio, since its correlation with other assets is on average 0.1.
It constitutes an effective protection against the so-called ‘tail risks’ or ‘tail risks’, which refer to events that have little chance of occurring and that affect an investment portfolio.
It is an asset with great liquidity , greater than that of German and US bonds, and than stocks.
It protects the investment portfolio in times of rising inflation and strong deflation .
Protects against currency devaluation risk as it is inversely correlated with fiat currencies, especially the US dollar.
“Its relative scarcity is the main advantage of gold compared to fiat currencies. Gold is essentially immune to inflation, due to its scarcity. Therefore, it makes sense to include it in the investment portfolio as an element of protection against inflation, while the global economy is heading inexorably towards an unprecedented monetary swamp” , they conclude from the Luxembourg consultancy.
The Covid-19 pandemic has disrupted all areas of our lives in 2020, from the social to the economic. The precious metals market has not been an exception and, although it has benefited from the flight of investors towards a safe haven, it has also undergone significant changes. In this post we are going to explain how the structure of the global demand for gold has changed as a result of the pandemic.
Central Banks
Threats Of The New Decade
Gold and money have had a close relationship for thousands of years. So close that, for many centuries, they were the same: gold was used to pay for goods and services. Subsequently, money was born that, at first, was backed by the precious metal. But even when gold stopped supporting so-called fiat money, its influence on international currencies is very important. In this post we are going to explain how gold affects these currencies.
Buying gold tends to reduce the value of the currency used to buy it
Inflation is one of the economic terms most feared by consumers. It means that they can purchase fewer goods and services with their money and, therefore, lose purchasing power and quality of life. One of the fears of the current economic situation is the forecast of a rise in inflation. Before her, gold is also presented as an essential element of protection. In this post we are going to see what inflation is, what is expected for the coming years and how gold can help reduce its impact on our economies.