“Elevated risks in the Middle East are prompting safe-haven demand for gold”, says Russell Medcraft CFP. Gold jumped to its highest level since the beginning of August on Wednesday as the escalating conflict in the Middle East sent investors flocking towards the safe-haven metal.

Gold, often used as a safe store of value during times of political and financial uncertainty, has risen 2.2% so far this week. Fed Chair Jerome Powell in remarks to the Economic Club of New York agreed “in principle” that the rise in yields was helping to further tighten financial conditions and “at the margin” might lessen the need for additional rate increases.  Higher interest rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest.

What has been the longest term trend of the price of gold

Think of Gold as a hedge for your Portfolio

The long-term return on gold has been a topic of interest among investors. Gold is often considered a safe investment and a store of value. However, it’s important to note that the performance of gold can vary over different time periods. From 1971 to 2022, the average annual return of gold and other assets worldwide was reported to be 0.4 percent, according to a Statista report.  While gold can act as a safe haven during market declines, its price can also experience volatility in the short term, just like in 2008. As a result, gold may not be the most suitable investment for short-term gains.

What countries hold the most Gold

The United States has the largest gold reserve, with more than 8,000 metric tons of gold. This was more than twice the gold reserves of Germany and more than three times the gold reserves of Italy and France. China ranked sixth for the amount of gold it has on reserve, but more gold is being mined in China than any other country in the world. While the share of gold reserves constituted 67 percent of the U.S. central bank holdings, in China this figure amounted to only 3.6 percent.

Australia and Russia hold the largest reserves of gold

Australia and Russia hold a large share of the world’s gold mine reserves, accounting for 8,400 metric tons and 6,800 metric tons, respectively. Worldwide, the production of gold reached an estimated 3,100 metric tons in 2022. That same year, China produced about 11 percent of the world’s gold.

How does gold compare to the NASDAQ index

10 year returns of gold

10 year returns of the NASDAQ index

The Nasdaq 100 was launched on January 31, 1985 and full year returns start with the year 1986. The index consists of the top 100 companies that trade on the Nasdaq stock exchange.

The final point

It is clear that the hype around Gold as an asset class comes to the fore when either a conflict on global proportions of an economic fundamental like inflation or recession becomes an area of concern. As an asset consultant, Longview Economics are recommending an increase to the allocation in your portfolio to act as a hedge. Our tailored portfolios will be assessing the short term benefit of this strategy.

Financial Choice Direct Portfolios

Please visit our website financialchoicedirect.com.au for further information or contact us on 1300 664 118. 

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