Quick Bites | Gold on the Charge!

Quick Bites: Gold on the Charge!

Gold prices are at record levels, above $3,040 per ounce on Thursday 20 March (time of writing), and hovering near all-time highs after the US Federal Reserve (Fed) kept interest rates steady at 4.5%. Uncertainty surrounding President Trump’s tariffs and fiscal policies led officials to project two more rate cuts by the end of 2025. Earlier, the precious metal briefly hit a new record of $3,047, driven by safe-haven demand amid escalating geopolitical tensions in the Middle East and trade uncertainty. Gold has surged 16% since the start of the year and is up 40% over 12 months.

Source: Trading Economics

Gold can be thought of as a strategic asset as it has the following characteristics:

• Liquidity (it is easily tradeable).
• Is not a counterparty’s liability.
• Carries no credit risk.
• Is scarce (historically preserving its value over thousands of years).

Indeed, the entire global stock of gold ever mined could fit into less than four (4) Olympic-sized swimming pools.

Gold also benefits from diverse sources of demand: as an investment, a reserve asset, gold jewellery, and a technology component. These attributes mean gold can enhance a portfolio by:

1. Delivering long-term returns
2. Improving diversification.

Gold has performed well over the past 1, 3, 5, 10 and 20 years, even against the strong performance of risk assets such as equities.

Source: World Gold Council

Secondly, gold has outperformed the purchasing power of the major currencies over time. Gold in USD has increased by 8% per annum since 1971 (54 years).

Source: World Gold Council

Third, gold has been less volatile than most equity indices, alternatives and commodities because of its scale, liquidity, and diverse sources of demand.

Source: World Gold Council

And lastly, gold is a diversifier that tends to work. Many assets are increasingly correlated as market uncertainty rises and volatility is more pronounced. Gold is different in that its negative correlation to equities and other risk assets tends to increase when these assets sell-off.

Source: World Gold Council