Should investors capitalize with gold’s recent surge?
For several years now, the world of trade and commerce has regarded gold as an inflation hedge. The mindset was that gold ideally serves as a great diversifying element for one’s portfolio, and at the same provide leeway for a struggling economy.
Money Management, a news and financial guide website, reports of gold’s tradition as a stable investment. “The results showed gold is expected to underperform assets like equities in a benign/growth environment, but is expected to add significant portfolio benefits in deflationary and inflationary economic conditions… Most importantly, the findings further exemplified that the inclusion of gold bullion in a balanced portfolio had the additional benefit of reducing the expected volatility in the investment returns,” the website added.
Gold’s resilience to economic changes has been the only trait that investors love to highlight. But the unusual downtrend of the investment’s price for the last few months triggered a change of perspective. In China, gold imports continue to rise. “Meanwhile, China is continuing to be very strong, with an 18% rise on the quarter and a 40% increase year-to-date,” says Marcus Grubb, managing director of World Gold Council, in a report by Bullion Vault. For Asian markets, the low price of gold is seen a good sign to invest and wait for gold to get back in good shape. However, other investors take this as a signal to drop gold from their portfolios.
Luckily, gold-investing optimists were rewarded with good news on the first few days of December. And in the coming months, we may be able to see an increase in gold’s price too. “Tighter monetary policy in the U.S. and rising rates are hanging over the market and could push gold towards $1,100/oz in 2014,” Merrill Lynch, analyst for the Bank of America, said in a December 2 report by Business Insider.
“Yet, while the pause in the bull market may continue, we see several encouraging signs, most notably physical demand from EM, that suggest to us that gold remains a sound medium-term investment,” the report concluded. If the trend continues, 2014 just might be a good year for gold investments.