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Investments in bullion products are not FCA regulated. The value of your investment can go down as well as up. Past performance is not indicative of future results.
 

A Review of The World Gold Council's H1 Mid-Year Outlook Report

 

The Royal Mint  

August 2023  

By Steve Jones

Checked by ,

Updated August 2023

The contents of this article, accurate at the time of publishing, is for general information purposes only, and does not constitute investment, pensions, legal, tax, or any other advice. Before making any investment or financial decision, you may wish to seek advice from your financial, pensions, legal, tax and/or accounting advisors. 

 

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The Mid-Year Outlook report from the World Gold Council suggests the consensus view of a mild contraction in US output and slowing growth in developed countries this year, coupled with a weaker dollar, should remain supportive of the gold price in H2 2023. It notes that, historically, when US rate rises have been put on hold, gold has performed well in the next six to twelve months, with average monthly returns of 0.7% (See chart 2). 

Conversely, gold may face challenges if interest rates rise further, or are held higher for longer than expected. Similarly, should the US economy avoid a prolonged slowdown and return to trend growth, this would then favour risk assets (e.g. equities) over gold, perpetuated by potentially a stronger dollar.  

According to this report, gold is also supported when economic conditions deteriorate, and notes that lead indicators, such as Purchasing Managers Indexes for the services and manufacturing sectors have been weakening for developed markets in recent months. What is more, it cites that a combination of stock market volatility and systemic risks, such as geo-political conflict and financial crisis, should see gold hedging strategies remain firmly in place.  

To summarise, the piece reverts to the utility of an allocation to gold in a well-diversified portfolio and how this could provide a more optimal ‘risk-adjusted’ return for investors. Furthermore, in its hypothetical analysis, the gold allocation provides for a smaller drawdown in portfolio value, thus protecting invested capital. (See Table 1).  

 

References: 

 

This article may include references to third-party sources. We do not endorse or guarantee the accuracy of information from external sources, and readers should verify all information independently and use external sources at their own discretion. We are not responsible for any content or consequences arising from such third-party sources.  

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About the Author:

Steve joined The Royal Mint in 2022 in the role of Business Development Manager, with a focus on wealth management products.

Steve began his career as a Graduate Trainee with Brewin Dolphin, working towards becoming a chartered investment manager. He spent nine years with Brewin before a stint with Rathbones Group.

Steve is a member of the Chartered Institute for Securities and Investment (CISI) and is Level 7 qualified, achieving a Diploma in Wealth Management, which is a post graduate level industry specific qualification.

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