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What’s so precious about metal?

  • August 27 2020
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Invest

What’s so precious about metal?

By Cameron Micallef
August 27 2020

As countries continue to battle the COVID-19 health pandemic, investors are turning to the safe havens of precious metals — a trend that’s likely to continue, according to an expert.

Gold

What’s so precious about metal?

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  • August 27 2020
  • Share

As countries continue to battle the COVID-19 health pandemic, investors are turning to the safe havens of precious metals — a trend that’s likely to continue, according to an expert.

Gold

Raf Choudhury, State Street Global Advisors’ senior investment strategist, Investment Solutions Group, pointed out that in the midst of the pandemic, gold has returned more than 30 per cent while silver is up by 35 per cent.

“Investor positioning reflects the positive sentiment and momentum behind gold. Uncertainty has likely led investors to look more at alternative assets that can provide a hedge to the equity risk and uncertainty,” Mr Choudhury said.

Mr Choudhury believes precious metals have three key tailwinds including investment demand, a weak USD and investors positioning their portfolio which is helping to aid the metals.

“The last point is a key one. The current COVID-19-induced environment is a fragile one with a number of headwinds that could stall or even reverse the recovery. That is supportive of positioning into gold,” Mr Choudhury said.

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“The risk is that if rates start to increase, that would be a headwind for gold; however, in the current environment, that is an unlikely scenario.” 

The investment strategist pointed out that investors should expect to see the price fall in the short term.

“A more likely source for a short-term pullback in gold prices is from investor profit-taking. With gold having rallied so strongly this year, that is a possibility. However, as we continue through the rest of the year, there remains an asset allocation argument that favours gold.”

With the economy facing headwinds of further lockdowns and geopolitical pressures, as well as central banks supporting the economy, investors will likely see positive returns in metals.

“Current interest rates at low/negative levels, in particular in real terms, is a real positive driver for an asset class like gold,” he said.

“USD is expected to face a number of headwinds and depreciation, which typically benefits gold.”

What’s so precious about metal?
Gold
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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