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Gold investment demand to remain strong through the rest of the year - WGC

Kitco News

(Kitco News) - After hitting an all-time high above $2,000 an ounce at the start of the month, there has been more back-and-forth in the gold market as investors start to take some profits.

Although gold prices have peaked, in a recent interview with Kitco News, Juan Carlos Artigas, head of research at the World Gold Council (WGC) said that investment demand is still expected to remain strong through the rest of the year.

Artigas said that investors are still trying to figure out the economic risks to the ongoing COVID-19 pandemic and at the same time navigate a world awash with liquidity and low interest rates.

“I believe that the fundamental drivers of investment demand are still very strong,” he said.

In particular, Artigas said that investors need to pay close attention to interest rates and the low yield environment. He explained because of the low yield environment, investors, who are forced to take more risks, have fewer safe-haven hedges. He added that is what makes gold so attractive.

“Before investors saw gold’s lack of yield as a deterrent or as a barrier. Clearly we are in an environment where rates are low and real rates are pretty much negative across the board in developed markets, that increases the appeal of gold,” he said. “Historically gold has been quite effective to provide protection against pullbacks in the stock market in periods of negative real rates.”

The comments come after the WGC released its second quarter trends report for the gold market. The report noted that although gold saw record investment demand for gold-backed exchange-traded products, physical consumption of the precious metal dropped 11% in the second quarter.

Artigas said that he was not concerned that the gold market risk as it has only one major pillar of support. He added that the WGC expects that consumer demand will eventually pick up. He added that investors should pay close attention to physical demand in emerging markets. He explained that consumers will buy physical gold to protect their wealth from debased currencies.

“Gold is used as a very reliable long-term investment for capital preservation around the world. And currency weakness is a reality for many investors,” he said.

Artigas added that he expects consumer demand to pick up in 2021 as economies start to recover from the devastating impact of COVID-19.

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