Gold has historically symbolised prestige and luxury, with ownership of the asset conveying status and wealth.
It still holds cultural significance today in many countries, largely India and China, where it is gifted by families at times of betrothal, marriage and birth.
To this day, gold remains a go-to asset in times of uncertainty.
Gold Performance Against the Stock Market
These connotations are not unfounded. Looking back just over the past ten years it’s evident that as a fundamental investment vehicle, it still holds weight.
Clearly, gold price peaks and troughs are more pronounced than in the 1960s when it was priced in two-digit figures.
Yet, despite the peaks and troughs, gold is still a relatively safe investment hedge against inflation, with an overall balanced portfolio of stocks, to weather the storms of undulating stock market indices’ movements.
Gold Outlook Over the Next 10 Years
A Hedge Against Uncertainty
Surely, few could have predicted the uncertainty surrounding the Covid-19 pandemic, which only began to ease in the first quarter of 2021, would see gold demand recover from the past two years to reach 4,021 tonnes - excluding over-the-counter (OTC) markets - according to the World Gold Council.
In the next 10 years uncertainty is likely to remain a hallmark and hence gold will likely continue to be a good investment when people and governments fear the worst, but always as part of a wider portfolio.
Higher gold prices may be prompted by fears of further pandemics in the future. Indeed, the Omicron and sub-variant BA.2 add another element of worry with consumers buying again to hedge against the unforeseen, with new variants being investigated all the time.
For private wealth, the alternatives are for assets to be locked away in bank vaults, in safes at home or kept in the investment sector in gold-backed exchange-traded funds (ETFs).
In terms of the demand for gold, there will likely be an increased industrial requirement in the coming 10 years in order to serve smart city infrastructure, aerospace applications such as satellite technology, and medicine.
Demand from the electronics sector bounced back in 2021 by 9% year-on-year to 220 tonnes. More advanced electronic devices and electric vehicles are gaining traction, and the consequent expansion of 5G infrastructure and automation devices will be a theme going forward spurring gold demand.
Is gold still a good investment?
So, where does that leave investors now who are projecting for the next 10 years? And is gold a good investment in the long term?
Gold can be kept as insurance for times of trouble in its physical form of either gold coins or bullion. This will remain a hedge for the occurrence of need when the pot of gold might have to be used or later replenished in times of abundance. This is unlikely to change due to the cultural basis of its accumulation by consumers in the retail sector.
Recent renewed interest from central banks saw purchases rise by 82% in 2021 to 463 tonnes, lifting global reserves to 35,600 tonnes - a near 30-year high, according to the IMF.
India added 77 tonnes to its gold reserve in 2021, the biggest increase since 2009 at 200 tonnes from the IMF. Notably, Thailand, Hungary, Uzbekistan, and Kazakhstan also significantly increased their gold reserves.
Jewellery fabrication was a testament to consumer sentiment when demand boomed in 2021 after Covid, when demand grew by 67% year-on-year to 2,221 tonnes, according to the World Gold Council. This was the highest rise seen since 2018, satisfying the global need for jewellery, with demand in India and China largely fuelling this demand in the fourth quarter.
Clearly gold remains important, both culturally, or as a hedge against uncertainty, despite the current economic recovery and steady price lifts.
History suggests that gold will remain a reliable safe-haven asset in 2022. But how it is held, whether as physical, paper or digital currency, may see some radical changes going forward in the next 10 years.
Thinking of gold investment?
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.