The counter-cyclical investment demand of gold!

Apr 02, 2024

In the recently published report, Gold as a strategic asset 2024 edition; the World gold Council focussed on gold return in the long run! Investors have long considered gold a beneficial asset during periods of uncertainty. Yet, historically, it has generated long-term positive returns in both good and bad economic times.

Its diverse give gold a particular resilience and to deliver solid returns in various market conditions. Gold is, on the one hand, often used as an investment to protect and enhance wealth over the long term, but on the other hand it is also a consumer good, via jewellery and technology demand.

During periods of economic uncertainty, it is the counter-cyclical investment demand that drives the gold price up. During periods of economic expansion, the pro-cyclical consumer demand supports its performance. Combined, these factors give gold the ability to provide stability under a range of economic environments.

Looking back over half a century, the price of gold in US dollars has increased by nearly 8% per year since 1971 when the US gold standard collapsed. Over this period, gold’s long-term return is comparable to equities and higher than bonds. Gold has also outperformed many other major asset classes over the past 3, 5, 10 and 20 years.

Moreover, the diversity of its sources of demand help to make gold a less volatile asset than some equity indices, other commodities or alternatives.

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