Gold

Election night approaches in the United States. Gold has received attention as a refuge (http://www.bloomberg.com/news/articles/2016-11-06/hedge-funds-are-hiding-out-in-gold-as-election-fears-grip-market) although the price came off today (http://www.kitco.com/charts/livegold.html) along with other safe haven assets. So what are the key price drivers for this precious metal?

1 US currency – historically an inverse relationship (priced in USD)

2 US inflation rates and money supply – positively correlated (inflation hedge)

3 Risk, politics and monetary system – positively correlated (safe haven status)

4 Demand – c. 70% for jewelry, this is seasonal

5 Supply – from mines (c. 60%) and sales of existing gold (Central banks, c. 25%)

6 Other commodities, global growth – indicative of increased demand

Real interest rates – inverse relationship (non-interest bearing asset)

Sources and additional links for reference:

https://www.etfsecurities.com/Documents/Research-what-really-drives-gold-prices.pdf

https://www.pimco.com/insights/viewpoints/viewpoints/demystifying-gold-prices

Six major fundamental factors

http://www.bangkokbank.com/BangkokBankThai/Documents/Site%20Documents/Mutual%20Funds/Article15_En.pdf

http://www.sunshineprofits.com/gold-silver/dictionary/gold-real-interest-rates/

Leave a Reply

Your email address will not be published. Required fields are marked *