The size of gold in investors' portfolios is only 1-1.5%. These volumes are very low compared to the value that gold can play.
One of the possible reasons for gold's growth is that people feel they have underinvested in this market, according to World Gold Council (WGC) leading market strategists John Reed and Joseph Cavatoni during the Unearthed podcast.
According to Cavatoni's observations, the size of gold in investors' portfolios is only 1-1.5%. "And these volumes are very low compared to the value that gold can play. If you look at 5-10%, the impact on the average portfolio will definitely be much more significant. In addition, well—known organizations such as Morgan Stanley recommend reformatting the portfolio from 60-40% to 60-20-20%, replacing bonds with gold," the expert emphasizes.
Reed believes that active purchases by investors in ETFs, especially in America and Europe, also contribute to the growth of gold. "If you look at the quarterly data, the inflow was approximately 221 tons, more in the United States than in Europe. And this is a general trend that we have observed, especially in the last month or two," he added.
Otherwise, experts agree that there are no reasons for sales, but a short—term correction is possible, which will not break the trend.
"The arguments in favor of gold remain. In the United States, the government has suspended its work, which has been going on for two weeks, and critical data that the Fed uses to make a rate decision has not been published. All this increases uncertainty, and investors continue to invest in risky assets," Cavatoni says.,
WGC experts note that, to what has already been said, the strength of the dollar, the weakness of the dollar, and the Fed's ability to independently manage the country's financial system with reliable information add uncertainty.… All this is becoming more and more incomprehensible to people, and they will look for a safe harbor.
At the same time, experts find it difficult to give an unambiguous answer to the question of whether it is too late to jump on this train.
Reed stressed that the WGC does not make forecasts for gold, but notes that all concerns will persist in the medium and long term.
"Expectations of lower interest rates, risks and uncertainty in the United States, especially in terms of economic policy, as well as the rhetoric of the White House. And finally, there is the risk of the Fed losing its independence, which I think has played an important role in making people think something like this: we like the U.
S. economy, but we don't like the risks associated with the U.
S. dollar and the Treasury bond market," Reed said.
Cavatoni, in turn, emphasizes that he sees no particular reason to adjust the price based on the current situation.
Recalling moments in the past when the price of gold was exceptionally rising, he says that this usually happened against the background of well-prepared market events.
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