Money Talks

December 18th 2020


Gold's dismal performance in November had some investors seeing visions of 2013 when massive outflows in gold-backed exchange-traded products caused gold prices to ascertain their biggest declines in 30 years.

Last month SPDR Gold Shares (NYSE: GLD) saw quite 60 tonnes of gold effuse of its holdings in November because the gold market saw its worst monthly loss in four years. Globally, the planet Gold Council said that quite 100 tonnes of gold flowed out of the ETF market, its second-biggest decline on record.

While ETF outflows remain a risk within the market, one investment company said that the present environment and market conditions are tons different than they were seven years ago.

In a webinar hosted by State Street Global Advisors, George Milling Stanley, chief gold strategist for the firm, said that in gold's last market , prices quietly rallied $250 dollar an ounce to nearly $1,000 an oz . During the 2008 financial crisis, investors began to check out gold as a safe-haven asset, which added to subsequent leg within the rally, then finally speculators caught on to gold's momentum and drove prices from $1,000 an oz in 2010 to its highs above $1,900 in 2011.

"The last Bull Run was very frothy with speculative and tactical investors jumping into the gold market. The rally to 2011 was never seen as stable," he said.

Looking to the 2020 rally, which drove gold prices above $2,000 an ounce, Milling-Stanley said that while the market was watching little frothy in August, the market has seen a healthy correction. He added that gold's run looks tons more stable than it had been nearly 10 years ago. He added that there are fundamental reasons supporting gold prices at current levels.

Adam Perlaky, manager of investment research at the planet Gold Council, who also participated within the webinar, said that he also expects the gold market to still enjoy further investor uncertainty in 2021.

"We haven't seen anything just like the COVID-19 pandemic, and that we really know what the complete economic impact will appear as if ," he said.

Perlaky noted that gold continues to be a beautiful safe-haven asset as equity valuations trade at record levels and bond yields remain at historic lows. He added that bonds don't provide investors the protection that they once did.

"The traditional 60/40 portfolio model isn't working, and that i don't see that model returning within the foreseeable future," he said. "Creating a worldwide multi-asset portfolio that has some of gold is that the thanks to go."

Milling-Stanley said that research from State Street shows that holding a tenth allocation in gold gives investors the most important advantage to lower their risk and market volatility while still showing the best returns.

As to how high gold prices can enter 2021, Milling-Stanley said that he sees potential for gold to succeed in estimates of $2,300 an oz .

"It's difficult to poke holes in a number of the forecasts calling for $2,300 an oz ," he said. "Given what went on and where monetary policy goes , these aren't pie within the sky forecasts."

According to both Milling-Stanley and Perlaky, the most important risk for gold next year remains the vaccine for the COVID-19 virus. Positive investor sentiment has picked up in recent weeks as hope grows that the worldwide economy will recover faster than expected.

However, both market analysts also noted that uncertainty wouldn't be departure anytime soon.

"I don't think the risk-on sentiment goes to be a uniform theme within the U.S. or round the world, and that i think investors will still be watching gold as a safe-haven asset," Milling-Stanley said.

Source : Businessinsider