Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

3rd Quarter | 2021

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Last week, gold prices finished the week at $1,654 per ounce, up more than 10%. This was after a volatile week that saw gold prices shoot back up to $1,700 per ounce at one point.

Although gold has outperformed other assets so far during the recent crisis, it has been held back by liquidations for dollars needed to cover losses in those other assets. Many analysts now see a different dynamic taking hold for a gold bull market.

Analysts at Goldman Sachs recently said, “We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now.”

MarketWatch adds, “In 2008, the Goldman analysts noted, the November announcement of quantitative easing was a turning point [for gold]” (see the following chart).

Gold also underperformed in 2008, until the Fed removed liquidity constraints

Sources: Bloomberg, Goldman Sachs Global Investment Research

The analysts see a similar turning point as happening last Monday (March 23), when the Fed announced its aggressive bond purchase plan. “The U.S. central bank said it would buy as many Treasurys and mortgage-backed securities as needed to keep financial markets running smoothly,” reports MarketWatch.

Rick Andrews is president of Avant Capital Management.



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