{"id":119387,"date":"2021-08-05T14:31:24","date_gmt":"2021-08-05T14:31:24","guid":{"rendered":"https:\/\/fin2me.com\/?p=119387"},"modified":"2021-08-05T14:31:24","modified_gmt":"2021-08-05T14:31:24","slug":"world-gold-council-expects-higher-prices-ahead","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/world-gold-council-expects-higher-prices-ahead\/","title":{"rendered":"World Gold Council Expects Higher Prices Ahead"},"content":{"rendered":"
Since mid-June, the price of gold has dropped by more than 7%, and for the year to date, the yellow metal is down by 3.8%. Gold prices rose $1,829 in the month of May (8%), but more than half that gain is gone now.<\/p>\n
According to the latest Gold Market Commentary from the World Gold Council (WGC), August may be a good time for investors to \u201cposition for the historically strong September gold performance.\u201d<\/p>\n
The WGC notes that the \u201copportunity cost of investing in gold continues to improve as the real earnings yield plus the dividend yield of the S&P 500 has reached negative territory for only the second time in 75 years.\u201d Additionally, with both the Federal Reserve and the European Central Bank placing more emphasis on employment and less on inflation, the central banks\u2019 bond-buying could be prolonged.<\/p>\n
Opinions vary on whether recent high inflation figures are transitory or permanent. In an interview Wednesday, JPMorgan Chase CEO Jamie Dimon does not believe inflation is transitory. He also said that he believes that once the unemployment rate drops to 4.5% the Fed will begin to reduce (taper) its bond-buying. The sheer size of the federal deficit, \u201cby itself almost has to be inflationary,\u201d Dimon said.<\/p>\n
Fed Governor Lael Brainard commented last week that the Fed\u2019s decision to taper \u201cwill depend importantly on the accumulation of evidence that substantial further progress on employment has been achieved.\u201d Brainard added that she expects to be \u201cmore confident in assessing the rate of progress once we have data in hand for September, when consumption, school, and work patterns should be settling into a post pandemic normal.\u201d<\/p>\n
Regarding claims that Bitcoin could replace gold as the \u201cultimate store of value,\u201d the WGC compared the beta between equities and both gold and Bitcoin. Beta measures the systematic risk (volatility) of an asset compared to the market as a whole. The council concluded that Bitcoin\u2019s beta to equities is \u201cmuch more emblematic of a risk-on asset\u201d than is gold, historically a risk-off asset. One can infer that gold is, therefore, a safer store of value.<\/p>\n
The WGC bases its expectations for a September rise in gold prices on historical trends that drive a confidence level of nearly 90% for such an increase. There are two primary reasons for the increase: strong demand resulting from the wedding season in India and other festivals in the following months and \u201chigher global investment activity following typically quieter summer months.\u201d<\/p>\n<\/p>\n