Gold's demand and its price are growing more amid the Fed's unscheduled meeting yesterday and the geopolitical situation. The prices of this yellow metal surged to a new three-month high:
John Reade, World Gold Council's Chief Market Strategist, said that the demand for gold as a safe-haven is positive, but prices could correct sharply if the geopolitical conflict is resolved immediately. And instead of looking at short-term price volatility, the World Gold Council study shows that gold plays a vital role in diversification for any type of portfolio.
If the portfolio contains between 4% and 10% of gold, this will be the optimal amount to increase risk-adjusted returns.
He made these comments as there was an interesting trend in the gold market last year – investment demand for exchange-traded products lagged behind physical demand. In its annual gold market analysis, the WGC reported that physical demand for this precious metal increased by 10% in 2021 to 4,021 tonnes. 173 tons of gold were liquidated from the ETF.
Looking over the rest of 2022, Reade thinks that the gold market is in good shape even though the precious metal faces the prospect that the Fed could raise interest rates seven times this year.
As for gold and bitcoin, Reade responded that the two assets are completely different. He explained that although digital currencies improved portfolio returns, they also added risk and volatility.
