Gold's Lack Of Volatility In 2018 Proves Its Merit - Sprott
(Kitco News) - This year’s market volatility had no significant impact on gold, which proves the yellow metal’s worth as a portfolio hedge, Sprott Asset Management said in a report.
“We have long been proponents of holding precious metal bullion and equities as a portfolio hedge against general market volatility. The events which transpired in February underscore the validity of our investment thesis,” Sprott’s portfolio manager Shree Kargutkar said in a report that was published earlier this week.
The low volatility bubble that burst in February will not be coming back anytime soon, Kargutkar wrote.
“February’s events provided a wake-up call for markets signaling that the period of historically low volatility has come to an abrupt end,” he said. “Volatility has simply reverted to its mean, indicating that the environment of exceptionally low volatility is likely behind us.”
Throughout all of this, gold proved to be resilient, explained Kargutkar, noting that the yellow metal was the exception.
“Gold bullion was a singular exception, given that its spot volatility as measured by the CBOE/COMEX Gold Volatility Index moved up by just under 3% from the beginning of 2018 to end the of February. By contrast, other asset classes [equities, global equities, Treasuries and currencies] experienced massive volatility increases of as much as 235% in the same time frame,” the report said.
Sprott projects a positive outlook for gold prices in the near term, pointing out a list of factors that could push the yellow metal higher.
“The declining U.S. dollar and rising inflationary pressures continue to provide favorable tailwinds for gold bullion,” Kargutkar said. “Investment capital has begun flowing back into both gold bullion and equity ETFs. We would encourage others to look into the precious metals equities space. You would be surprised at how profitable some of these companies can be with gold prices above $1,250/oz.”
April Comex gold futures slumped on Thursday and were last seen trading at $1,316.70, down 0.08% on the day.