Alistair Hewitt says global economies are being drained by ongoing tensions such as the dragged-out Brexit and intense US – China trade war. With investors maintaining a downbeat attitude to economic growth worldwide, 54 central banks have cut rates so far in 2019, the highest figure since the last global economic crisis.
Negative yielding date has skyrocketed as a result of rate cuts, shooting up 260% in the last 12 months.
Hewitt says there are four major drivers for gold overall; economic expansion, market downturns creating risk and uncertainty (which we’re witnessing now), opportunity cost and momentum.
He explains, “Opportunity cost has been the most important factor driving the gold price up in 2019. As shown above, interest rates have been lowered and the stock of negative yielding bonds has grown rapidly, lowering the opportunity cost for holding gold. Falling rates coupled with negative returns have made government debt less attractive increasing the possibility of higher inflation and currency depreciation in the future.
These factors contributed to investors renewed interest in gold helping push gold-backed ETF holdings to a record high in September.
Looking ahead, more central bank interest rate cuts are likely, further supporting investor interest in gold.”
With the landscape ripe for soaring demand, now is a very smart time to buy.