Gold has begun the fourth quarter positively, rising after a disappointing U.S. jobs report, and the
World Gold Council says there is still a case to hold the yellow
metal and investors shouldn’t be so focused on the potential of U.S.
interest rate hikes.
According to Will Rhind, CEO of World Gold Trust Services, a wholly-owned subsidiary of WGC, a rate increase is not a "defining factor" for gold prices mainly for the simple reason that the main demand doesn’t come from the U.S. or U.S. investors, it comes from China and India.
"It is certainly a factor in the overall
pricing construct of the gold market but it is not the defining
factor," he added.
Rhind said that investors should still consider the metal for portfolio
diversification, noting that the market is actually at a critical
point.
"We’re at an inflection point where gold prices are
down year-to-date but they’re down less than the S&P500 YTD," he
said. Thus, "gold has outperformed on a relative basis the U.S.
equities market."
Investors should think about raising a position in gold, as more volatility lies ahead.
Rhind argued that the yellow metal differs from the majority of other
commodities, which have been in a downtrend since last year when oil
prices saw a painful drop.
"The amount of demand for gold is not just focused from
investors, it’s focused from consumers around the world," he said.
"So,
over a longer term, gold is actually correlated with economic growth and
while that may be counterintuitive to some who look at it purely from
an investment lens, it’s actually straightforward from the global demand
perspective."
