Category: Market News
Gold appealing to younger family office investors amid market volatility
Source: CRAIN CURRENCY | Marcus Baram
Jun 15, 2023
KRISTINA RUOTOLO
For centuries, gold has retained an allure as a safe-haven asset, especially during times of turbulence and market volatility.
Family offices and ultra-high-net-worth investors — using gold as part of their asset diversification strategy — have recently helped boost its price, which has increased 35% in the past five years. Traditionally favored by older investors, this time it’s attracting next-gen family office members, gold market analysts say.
“Since late 2022, investors appear to have gravitated toward the precious metal as a way to preserve their wealth and hedge against the risk of a recession later this year,” said Han Tan, chief market analyst at Exinity Group in Abu Dhabi.
Gold is often favored during times of crisis for several reasons. Despite its high price volatility, it is a relatively secure investment and extremely stable in value. Because it often goes against market and interest-rate changes, gold can serve as insurance against economic downturns. That’s partly due to its rarity and limited supply.
As a tangible asset, the precious metal — in the form of gold coins, gold bars or jewelry — protects investors against inflation, said Joseph Cavatoni, North American market strategist for the World Gold Council.
That protection appeals to family offices, which use gold to diversity their assets and as a “shock absorber in their portfolio” during these times of inflation and high interest rates, Cavatoni said. He’s seeing more interest from European family offices versus the U.S. market, though retail sales to consumers have slowed in India and China due to pandemic-related lockdowns.
“We’re seeing ultra-high-net-worth individuals come on the scene and make big purchases,” said Bill Voss, founder of Bullion Box, a subscription service that sends a curated box of precious metals every month. One favored strategy for investors, he said, involves building a portfolio that is one-third bullion, one-third semirare numismatic coins and one-third rare coins.
“Secondarily,” Voss said, “we’re being approached by family offices and other groups about acquisition opportunities in the sector.”
A major reason for gold’s recent price increase is that it’s being snapped up by more central banks around the world as part of their reserves portfolio, and it’s being used to manufacture electronics and many consumer products like cellphones, Cavatoni said.
Younger wealthy investors who may have been burned by the collapse of the crypto market also are increasingly turning to precious metals — including gold, silver and platinum.
“We’re getting so many requests from younger generations for precious metals,” Voss said. “It used to always be 50-something-and-older customers, but now it’s skewing much lower.”
Part of gold’s appeal is its tangible quality as a beautiful physical asset, Cavatoni said. For many people, it’s about “I can get a little bling and have it earn at the same time,” he said.
People who don’t necessarily trust the banks right now “want to hold something in their hands,” Voss said. “If more banks crash, they know they have something to go to and put their hands on.”
So far, the outlook for gold looks positive. Spot gold has advanced by more than 7% so far this year, said Exinity Group’s Tan, “on hopes that the Fed is approaching the end of the current rate-hike cycle.”
All that glitters for now just may be gold.
AUTHOR Marcus Baram
Marcus Baram is a contributing editor at Crain Currency, where he covers the intersection of finance and politics. Prior to joining Crain Currency, Baram was a staff writer at Fast Company and an editor at Huff Post. He has also written for outlets such as The New York Times, The Atlantic, and Vice. Baram is an expert on economic policy and has a deep understanding of the ways in which politics shapes the global financial system. In his role at Crain Currency, he brings a unique perspective to the complex and ever-evolving world of finance. With his keen analysis and clear writing, Baram helps readers make sense of the important issues impacting the economy today.
Gold can overcome near-term headwinds
Source: UBS CIO Daily Updates
by Chief Investment Office08 Jun 20233 min read
Thought of the day
The price of gold has remained under pressure following the stronger US employment report supporting expectations that the Federal Reserve will “skip” rather than ending hikes at its policy meeting next week. The potential for higher rates over coming months, after evidence of stubbornly high inflation, raises the opportunity cost of holding the precious metal, which generally doesn’t provide a yield. In addition, sentiment on gold was also undermined by International Monetary Fund data showing official gold reserves declined by 71 metric tons in April, which was the first net decrease in over a year.
As a result, gold has now fallen more than 5% from its recent peak in early May, when investors were more confident that the Fed had already finished its rate-hiking cycle. In our view, a further slide in gold to around USD 1,870 an ounce is possible (from USD 1,945 at present), as markets push back expectations for the start of rate cuts from the Fed.
But we still see potential gains for gold over the coming year, and we view the precious metal as a valuable hedge in portfolios.
Fed policy and the prospect of dollar weakness still supports gold. While the Fed is on a more hawkish trajectory than had been thought in early May, an imminent end to rate hikes still looks likely. In addition, the Fed is closer to starting a cutting cycle than its peers, including the European Central Bank (ECB). We also expect the Bank of Japan (BoJ) to back away from its ultra-easy monetary policy stance, relaxing its targets for government bond yields. This combination can be expected to weaken the US dollar, making gold less expensive for investors holding other currencies. Gold has historically performed well when the US dollar softens due to their strong negative correlation, and we see another round of dollar weakness over the next 6–12 months.
Central bank demand for gold should remain healthy, despite the recent decline. The decline in official holdings reported by the IMF does not reflect a reduction in enthusiasm for gold among central bankers, in our view. The Turkish central bank was reported as the major seller, but the World Gold Council believes these sales were due to local dynamics rather than a change in the central bank’s long-term strategy.
The longer-term trend suggests no reduction in appetite for gold among central bankers. Last year marked the 13th consecutive year of net gold purchases by global central banks and the highest level of annual demand on record dating back to 1950. At 1,078 metric tons in 2022, central banks’ buying of gold more than doubled from 450 metric tons in 2021. Based on the 1Q23 data from the World Gold Council, central banks are on track to buy around 700 metric tons of gold this year, much higher than the average since 2010 of below 500 metric tons.
Geopolitical and economic uncertainty could boost demand for gold among both investors and central banks. Gold has long benefited from safe-haven inflows during periods of geopolitical strife. The intensifying rivalry between the US and China, along with tensions arising from Russia’s invasion of Ukraine, make further flare-ups more likely. In addition, gold’s relative performance versus the S&P 500 improves significantly during US recessions, based on data since the 1980s. While recent US economic data have been resilient, stubbornly high inflation raises the risk that the Fed will overshoot in tightening rates—especially if regional banks continue to cut back lending to ensure liquidity following recent deposit outflows.
So, we continue to see upside in gold over the coming year. We keep our forecast of USD 2,100/oz by year-end and USD 2,250/oz by mid-2024 unchanged.
Silver fell as optimism over Fed cutting interest rates this year faded
Source: Investing.com | Kedia Advisory | Commodities News 2023-05-11 03:46
Silver yesterday settled down by -0.99% at 76688 as optimism over the Federal Reserve cutting interest rates this year faded after the U.S. inflation report, triggering profit-taking among some investors. The headline inflation rate in the US unexpectedly declined to a 3-year low of 4.9% in April strengthening bets that the Federal Reserve may be over with the tightening cycle. The annual core consumer price inflation rate in the United States, which excludes volatile items such as food and energy, ticked down to 5.5% in April 2023, as expected, from 5.6% in the prior month, amid a downtick in the cost of rent.
On the other hand, the inflation rate in the UK was at 10.1% last month, staying above 10% for the 7th consecutive month and remaining close to the 40-year high of 11.1% reported in October. As a result, UK policymakers are widely expected to raise interest rates by 25 basis points to 4.5% on Thursday and the market forecasts rates to rise further to around 4.8% later this year. New York Fed President John Williams said inflation remains too high and the central bank will raise rates again if necessary, adding he doesn’t expect inflation to return to the Fed’s 2 per cent goal until the next two years.
Technically market is under long liquidation as the market has witnessed a drop in open interest by -7.99% to settle at 18563 while prices are down -768 rupees, now Silver is getting support at 75928 and below same could see a test of 75168 levels, and resistance is now likely to be seen at 77784, a move above could see prices testing 78880.
Gold inches up on weaker dollar as investors focus on US inflation
Lower interest rate expectations from the Fed could cause the bullion to trend higher, analyst says
08 MAY 2023 – 07:46ASHITHA SHIVAPRASAD
Bengaluru — Gold prices edged up on Monday as the dollar eased, while investors awaited a key US inflation data due this week that could influence the Federal Reserve’s monetary policy stance.
Spot gold firmed 0.3% at $2,021.80 per ounce by 3.23am GMT (5.23am). US gold futures rose 0.2% at $2,028.20.
The dollar index dipped 0.1%, making bullion more attractive to overseas buyers.
The US consumer price index (CPI) data is due on Wednesday.
Any signs of inflation being subdued would hinder the greenback due to lower interest rate expectations from the Fed, which could cause gold to trend higher, said Tim Waterer, chief market analyst at KCM Trade.
Traders also keep a tab on the developments over the US banking sector and the US debt ceiling.
US Treasury secretary Janet Yellen on Sunday issued a stark warning that a failure by Congress to act on the debt ceiling could trigger a “constitutional crisis”.
Gold would be among the “prime beneficiaries” if there are further signs of weakness in the US economy and prices could move to $2,100 sooner rather than later, Waterer said.
Economic uncertainty and lower rates attract demand for zero-yielding bullion.
“We are constructive on precious metals going into May … We anticipate a trading range of $1,954-$2,080 per ounce for gold [in May],” Edward Meir, metals analyst at Marex, said in a note.
On the physical front, China held 66.76-million fine troy ounces of gold at end-April, up from 66.50-million ounces at end-March.
Spot silver was up 0.2% at $25.70 per ounce.
Platinum rose 0.2% at $1,061.36, and palladium gained 1.3% to $1,510.55.
“Platinum is regaining investors’ attention as fundamentals improve,” ANZ wrote in a note.
“SA mining challenges weigh on supply recovery this year, while demand is getting support from gold as well as substitution away from palladium.”
Reuters