Couldn’t Be A Better Time To Buy Gold – WGCBy Kitco News
Thursday October 06, 2016 13:18
(Kitco News) - While some gold investors are running for the hills as speculation of higher global interest rates grips the marketplace, one consultancy group is trying to put broader monetary policy into perspective.
In a report published late Wednesday, the World Gold Council said that gold’s sharp selloff this week should provide a good entry point for investors to buy the metal as a hedge against the “new normal” of low interest rates.
“Even though central banks may start to normalize monetary policies, such a prolonged period of extraordinary measures has led to a structural shift in asset allocation that will linger much longer,” the report said. “In this new normal of lower returns and higher uncertainty, gold has an important role to play in the portfolios of investors large and small.”
Looking at interest rates, the WGC said that even if real rates turn positive but remain at low levels, below 4%, then gold is expected to have positive average returns. Despite the market fluctuations, the WGC said that the broader market environment of low and negative interest rates will continue to support gold prices.
The council also noted that although gold prices have seen significant declines, there has been no major liquidation in exchange-traded products.
SPDR Gold Shares, (NYSEARCA: GLD), the world’s biggest ETF, saw its reserves hold steady at 947.95 tonnes on Tuesday, the same day futures prices dropped more than 3%. The data shows that GLD’s gold reserves have only dropped by 0.32 tonnes to 947.63 in the first three trading days of the month.
“We believe this is an indication that there is still good appetite for gold amongst the investment community,” said the WGC.
The council also remains optimistic on gold as they expect physical demand in India and China, which has been lackluster at best, to pick up in the wake of lower prices.
“The price correction also comes at a good time for Indian consumers. With a good monsoon, the upcoming wedding season and Diwali and Dhanteras festivals, demand could pick up after subdued activity year-to-date,” they said. “Anecdotal evidence suggests that consumers had been holding off purchases in previous months, so this may well trigger an increase in demand.”