{"id":1198684,"date":"2020-07-29T12:32:49","date_gmt":"2020-07-29T17:32:49","guid":{"rendered":"https:\/\/www.mining.com\/?p=1031158"},"modified":"2020-07-29T12:32:49","modified_gmt":"2020-07-29T17:32:49","slug":"gold-price-rally-fueled-by-non-traditional-buyers","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1198684","title":{"rendered":"Gold price rally fueled by non-traditional buyers"},"content":{"rendered":"

Gold\u2019s surge to an all-time high is being fueled by an unlikely group of buyers<\/a> in the form of pension funds, insurance companies and private wealth specialists.<\/p>\n

Spot prices have risen 29% so far this year and climbed to a record high<\/a> of $1,980.55 an ounce earlier this week. Since then it has retreated slightly, trading at $1,960.18 an ounce as of 1:15 p.m. EDT on Wednesday.<\/p>\n

In the past, when bonds offered heftier yields, many professional investors had little use for gold. A broad portfolio of stocks and bonds could generate a reliable yield, and the two assets would balance each other out during market downdrafts.<\/p>\n

Gold, which offers no income, is hard to value and costs money to keep in storage; however, the investment landscape has changed due to the covid-19 pandemic. <\/p>\n

Managers who run long-term portfolios worth trillions of dollars are now taking interest in gold as they search for returns in a yield-starved economic environment.<\/p>\n

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With $15 trillion in debt offering negative yields and the Federal Reserve likely holding rates near zero for the foreseeable future, some on Wall Street are questioning the wisdom of owning bonds and looking elsewhere for assets to hedge against equity volatility.<\/p>\n

The broader array of buyers is one of the key dynamics behind the rally to $2,000 an ounce, even as gold\u2019s traditional customers in India and China remain on the sidelines.<\/p>\n

\u201cSafe 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,\u201d said Geraldine Sundstrom, who focuses on asset allocation strategies for Pacific Investment Management Co. in London.<\/p>\n

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\u201cWe need to diversify our diversifier and look for safe haven beyond government bonds. Given Pimco\u2019s view that rates will be kept very low for years to come causing depressed levels of real yield, gold feels like an appropriate diversifier.\u201d<\/p>\n

Geraldine Sundstrom, managing director and portfolio manager, PIMCO<\/cite><\/p><\/blockquote>\n

Pimco, which manages $1.9 trillion in assets, is far from alone. In a May note, Citigroup Inc. cited \u201cnew non-traditional investors in bullion, including insurance companies and pension funds\u201d as part of the fuel behind the rally.<\/p>\n

Last week, Swiss private bank Lombard Odier & Cie SA said it added gold to its \u201cstrategic asset allocation.\u201d Arbuthnot Latham & Co., a private bank managing money for clients including trusts and personal pensions, says it\u2019s bought more shares of gold mining companies as a proxy to the precious metal, according to Chief Investment Officer Gregory Perdon.<\/p>\n

\u201cThere has definitely been more widespread institutional ownership of gold than in previous rallies,\u201d said John Reade, chief market strategist at the World Gold Council. \u201cGold\u2019s in the conversation now with much more investors than it was 10 or 20 years ago.\u201d<\/p>\n

Even so, gold ownership among the professional class is viewed to be low. The total value of investor positions in gold futures and exchange-traded funds (ETFs) is equivalent to just 0.6% of the $40 trillion in global funds, according to UBS Group AG strategist Joni Teves. That position could easily double without the allocation looking extreme, she wrote in a note.<\/p>\n

\u201cIt\u2019s odd why pension funds would want to buy gold,\u201d said Mark Dowding, chief investment officer at BlueBay Asset Management. \u201cIt delivers no income or dividends and it costs money to store. It also does nothing to match assets to liabilities.\u201d<\/p>\n

The reason may be that gold simply tends to do well during times of inflation or when equities stumble — two scenarios that seem within the realm of possibility in the current environment.<\/p>\n

\u201cThe lower real yields go and the weaker the dollar, the more attractive gold is,\u201d said Charles Diebel, a portfolio manager at Mediolanum International Funds.<\/p>\n

\u201cNormal buyers of gold wouldn\u2019t be driving this,\u201d he added, referring to retail investors and jewelry buyers. \u201cIt would be long-term investors looking for diversification.\u201d<\/p>\n

(With files from Bloomberg)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Gold is getting a lot of attention from pension funds, insurance companies and private wealth specialists.<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[2849,949,369],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198684"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1198684"}],"version-history":[{"count":2,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198684\/revisions"}],"predecessor-version":[{"id":1198697,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1198684\/revisions\/1198697"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1198684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1198684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1198684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}