CBA : Gold Will Remain ‘Well-Supported’ Unless Market Volatility Swells

Gold has finally started to regain its lost value, after a tough run of about 4 years. On the back, of the renewed US dollar, there lies heightened volatility together with weakness for the currency. While this marks start of the year, spot price has recovered strongly enough getting back to levels not seen before in 2015. Mirroring these developments in price, demand for gold has also picked its intensity.

A mining and energy commodities analyst at the CBA, stated Gold Exchange Traded Funds (ETFs) has recently noticed a hike of 18.9% making it to 55.9 million ounces from the start of the year. This demonstrated a renewed demand for the precious metal.

The ETFs aim to mirror movements in the fundamental spot gold price. These are also sometimes referred to as paper gold, as there is usually no physical delivery of gold from buyers to sellers.

We elaborate our points here, by means of this chart.


“The lift in USD gold prices has come as investors pare back their expectations for further interest rates hikes by the US Fed,” says the CBA representative. “Market turbulence, particularly in oil and equity markets, has also prompted Gold prices higher on stronger safe-haven demand.”

The CBA representative further suggests that negative interest rate policy from the European Central bank or the Bank of Japan has been increasing the appeal of gold as a store of value.

When it comes to the near-term outlook for gold, the CBA representative suggests, the metal must remain well supported as long as the volatility of the financial market remains at tolerable levels.

“While gold does act as a safe-haven asset, we believe investors will move to USD and US treasuries if risk levels get high enough,” states CBA. “For now, as long as risk levels remain anchored at current market levels and investors expect US interests will take longer to normalize, we expect gold prices to remain well supported.”

Gold is precious; it is something to fall back on at times of crisis. The fact that gold price shows promises of stability, brings solace to any average Canadian household, which is planning to invest in gold instead of real estate, stock market or other assets.

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