The outlook is bright for gold and gold equities

The fast view

• Gold has long been considered an important part of a multi-asset investor’s toolkit. Although interest in the asset class as a standalone investment has historically fluctuated, its reputation as a safe-haven, inflation-protecting diversifier has accounted for its consideration within a broader portfolio. Sentiment around interrelated factors such as the level of US real interest rates, US dollar weakness, central-bank policies and uncertainty/market volatility has contributed to ebbs and flows in investor demand for gold. Although at times gold has experienced a somewhat unpredictable price performance, ultimately investors have been rewarded through attractive returns over the long-term with significant portfolio diversification benefits.
• In 2020 we saw a perfect confluence of factors that pushed gold to record highs. Due in large part to the COVID-19 pandemic, rising economic uncertainty, inducing unprecedented levels of monetary easing and fiscal stimuli, combined with doubts about the defensiveness of government bonds to drive gold up through US$2000/oz. This backdrop, combined with an overall positive but volatile period for equity markets, also proved to be highly supportive for gold equities.
• In this paper, we outline the characteristics underpinning the asset class and identify the key drivers we believe are important for its performance. This is followed by a summary of the different ways that investors can access gold and a description of the benefits we see these different approaches having in a broader portfolio context.