The base of gold investors is growing. Major players have joined the game.

IBIS InGold Editorial Office

24. 08. 2020

Here we go. Gold has overcome its historical record record, and its popularity continues to grow. The yellow metal has gained its fans among investment funds, insurance companies or pension funds.

 

It is also perceived as a particularly attractive asset by high-ranking fund managers whose investment portfolios are built on long-term investments that are worth several billion dollars. Indeed, investors are looking for interesting returns that do not appear much in the investment environment today. The fact that gold has once again proved to be a safeguard against the crisis and a profitable investment extended its fan base while pushing its price closer to the psychological threshold of USD 2,000.

However, it was not easy to achieve such success. In the past, gold lagged behind the combination of shares and bonds, which sufficiently ensured a balanced, reliable and earning portfolio, in the eyes of investors. But the situation has changed very quickly. Regarding the US government debt of $ 15 trillion, the bonds are being sold at negative yields. Moreover, the FED shall keep interest rates very low soon. That is why investors began to think about a wiser way where to put their money to make it profitable.

“Safe government bonds have always played a very important role as a portfolio diversifier and will continue to be, but we have to recognize that their potency is diminishing due to the low absolute level of yields,” said Geraldine Sundstrom, who focuses on asset allocation strategies for Pacific Investment Management Co. (Pimco) in London. “We need to look at other ways to achieve a balanced portfolio. Gold is ideal in this regard,” she added.

In addition to Pimco, for example, Citigroup noted that gold is gaining new supporters among insurance companies and pension funds. The Swiss private bank Lombard Odier & Cie has also informed that it had purchased shares of the companies that mine precious metals in addition to the gold.

“The lower real yields and the weaker the dollar, the more attractive the gold is,” said Charles Diebel, a portfolio manager at Mediolanum International Funds.

“There has been a large increase in demand for gold. Precious metal is a part of far more portfolios than ten or twenty years ago,” said John Reade, a market strategist at World Gold Council.

According to Mark Dowding, the investment director of the BlueBay Asset Management, pension funds look for gold mainly because it is very good at protecting money at the time of inflation or when the stock prices fall. These two things are very likely to happen soon.

Expanding the investor base can bring additional benefits to gold. If the price of the precious metal is corrected, the buying-in will be likely to involve investors, who have been waiting, and the price decrease will not have a long duration and will be the accelerator to reach further maxima.