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“Extremely attractive environment” for gold investment

 

We have seen gold prices fall to their lowest point of the year so far within the last seven days – making this an “extremely attractive environment” for gold investment according to the banking firm, Standard Chartered. In the last week, gold prices fell to $1270, a movement which has been attributed to a strong US dollar and an uptick in the 10-year US Treasury yield.

While this has meant equity prices and nominal bond yields have strengthened a little, Eric Robertson from Standard Chartered says this isn’t the big picture. Speaking to Bloomberg, he said, “We are very constructive on gold, both within our strategy teams and within our commodity research teams…real or inflation-adjusted yields remain extremely low. And that’s a better indicator for gold.”

Research firm Capital Economics has backed this view and underlined that the temporary dip in gold prices makes now a superb environment for gold investment, noting that it forecasts gold prices to increase to $1400 within the next couple of months. Commodities economist Ross Strachan further explains this, commenting “Given that we expect the S&P 500 to drop by roughly a fifth this year, we think gold’s safe-haven credentials will soon come to the fore again.” Historical data shows that a sustained decline of more than 10% in S+P traditionally results in an average 7.2% increase in the price of gold.

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