Gold Supported amid Inflation Concerns
July 22 2009 - 7:13AM
Business Wire
The gold price increased modestly in the second quarter,
supported by, among other things, ongoing inflation fears.
Traditionally an inflation hedge, gold was sought by investors who
had growing concerns about central bank�s exit strategies and the
implications of a reversal in quantitative easing measures,
according to World Gold Council�s latest Gold Investment
Digest.
The gold price edged slightly higher in Q2 �09, ending the
quarter at US$934.50/oz, on the London PM fix, compared with
US$916.50/oz at the end of Q1 �09. The gold price fixed as high as
US$981.75/oz on June 1 coinciding with the quarterly low in the
dollar, which was pressurized, among other things, by growing
questions about its future as the world�s reserve currency.
While other asset classes such as oil, the commodity complex in
general, and equities outperformed gold during the second quarter,
on a year-over-year basis gold posted a small gain while the others
suffered sharp declines. Investors continued to increase their gold
holdings via exchange traded funds in the second quarter, though at
a much slower pace than the record amount of gold purchased via
this channel in Q1 �09. Retail investment in coins and small bars
also slowed in the second quarter, according to the anecdotal
reports from dealers, while investors marginally increased their
holding of gold futures.
Natalie Dempster, Head of Investment, North America, World Gold
Council commented:
�Fears of future inflation drove investor interest as seen by
the continued demand for the ETFs during the quarter.
Traditionally, gold has been an effective inflation hedge, and as
our recent study shows, also performs well during low to medium
inflationary environments.�
The recent study, which examined the relative performance of
four traditional inflation hedges (gold, real estate, Treasury
Inflation-Protected Securities (TIPS) and general commodities),
found that in two of the three historical scenarios gold would
likely outperform other traditional inflation hedges. The study
also found a strategic case for gold in the portfolio of an
investor that already holds TIPS, due to the additional
diversification benefits gold brings to a portfolio.
The full report can be found here:
http://www.gold.org/deliver.php?file=/rs_archive/AssetAllocation_Inflation_July09.pdf
World Gold Council
World Gold Council�s mission is to stimulate and sustain the
demand for gold and to create enduring value for its stakeholders.
It is funded by the world�s leading gold mining companies. For
further information visit www.gold.org.