The Outperformance of Gold – A Possible Explanation
| Dear Ladies and Gentlemen
I was asked to write an article on gold for the “Global Executive” magazine. The introductory part of the article reads like this: “By August 21, the year to date price of gold had gone up a hefty 27%. While many other asset classes experienced difficult times, the gold price not only showed significant resistance against global concerns on political issues, trade disputes, an oil price crash, Brexit, Covid-19 pandemic, social unrest in the U.S. and other countries, and more but was able to show a substantial positive outperformance over many other asset classes. Gold usually moves upwards if investors fear any form of disruption. To mention only fear regarding the recent performance increase, however, would not do the price development justice, as various reasons lead to this price increase. In August 2018 one ounce of gold would cost slightly over USD 1’200. Today one ounce of gold costs almost USD 2’000. Over the same period, interest rates for U.S. government bonds have come down to almost 0%, which means the opportunity cost of holding gold versus U.S. government bonds practically disappeared. Furthermore, the interest differential between the USD currency region and the EUR currency region virtually disappeared as well and resulted in a weakening of the U.S. Dollar in relation to the Euro. A weaker U.S. Dollar, lower interest rates, speculation, a pandemic, political unrest in the U.S. and other countries, trade wars, massive global financial stimulus, fear of inflation, if not hyperinflation, and more, all of these are the main drivers for the current outperformance of gold.” If you feel like reading more, please do not hesitate to click on the link below and enjoy the read: https://www.incrementum.li/en/journal/the-outperformance-of-gold-a-possible-explanation-summer-2020/ And please, Ladies and Gentlemen, never forget what I have been mentioning on numerous occasions: “We keep gold, we see some very particular and robust long-term positive features of holding gold, but just because we hold gold, we are not hoping for war, hyperinflation and the like.” Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li Many thanks, indeed! And now, Ladies and Gentlemen I wish you a great day and weekend. Yours truly, Stefan M. Kremeth Tel.: +423 237 26 60 |
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