(WGC) of the World Gold Council pointed out that US stocks are in a state of extremely high valuations, while in the environment of extremely low global interest rates, there will be strong volatility and significant decline in the future market. While vaccines offer hope to global markets, markets are at risk if they are distributed more slowly than expected and provide a worse-than-expected boost to the economy. This is good for gold, a safe-haven asset.
The World Gold Council points out that there are also many concerns about geopolitical risks, including large and growing budget deficits, which could lead to inflationary pressures in an environment of extremely low interest rates and a surge in the money supply. Gold usually performs well in an environment where the stock market is falling or inflation is higher. Gold prices reap an average annual increase of 15 per cent whenever inflation is above 3 per cent. Gold usually does well, even in a deflationary environment. There is an obvious correlation between money supply and gold price.
The World Gold Council pointed out that the economic recovery of emerging market countries also means a rebound in physical gold demand, which is also good for gold prices. As gold prices rose last year, central banks around the world bought less, but they will not disappear completely, especially in the current macro environment, where central banks will continue to use gold to diversify their reserves. As a result, gold is likely to continue to perform strongly this year.
