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Favourable Outlook For Gold This Year
Amanda Cheesley
21 February 2023
Prospects for gold investors look positive as they grasp the yellow metal's safe-haven status at a time of geopolitical worries and economic uncertainties, so figures in the sector say. But gold hasn't been a sure-fire inflation hedge, based on recent price data. The near-term outlook for gold remains favourable, relative to many other asset classes for a UK-based investor, David Jane, multi asset manager at , the value of gold is continuing to surge to unprecedented heights, despite facing economic headwinds while retaining its status as the ultimate store of wealth. The growth has resulted in gold controlling a significant market cap compared with selected banking entities. Data acquired and calculated by Finbold this month indicate that gold accounts for a market capitalisation of $12.34 trillion. The valuation is at least six times more compared with the combined market cap of $2.03 trillion controlled by the world's 10 largest banks, the firm said in a statement. According to the firm’s research report, gold's significant market capitalisation complements the asset's historical status as a safe haven for investors seeking to protect their wealth against economic and political uncertainties. Notably, the reputation has been put to the test over the past year as the global economy continues to face uncertainty arising from inflation, interest rate hikes, and the lingering threat of recession, it added. Looking ahead, the firm believes that gold is likely to sustain its significant market cap as banking stocks continue to face volatility from the declining economic conditions. Rate debate Therefore, he thinks that the near-term outlook for gold remains favourable, relative to many other asset classes for a UK-based investor. From a portfolio management perspective, gold, like other real assets, may play an increasing role in coming years, he added. Premier Miton Investors has a material investment position in gold and other commodities. “With global government debt now at unprecedented levels, the only practical way of reducing it is inflation and negative real interest rates. In such an environment gold and other commodities may be amongst the more attractive asset classes, even though many multi asset managers do not even consider them currently,” Jane said.
Premier Miton Investors' Jane thinks that it is more likely that the Fed will pause too early and inflation will remain higher for longer, with real rates still too low. If that occurs, then gold may perform well in dollar terms and its performance in sterling will be a function of how successful the UK is at getting its own inflation under control.