The stock exchanges wavered this morning, hit by the sudden wave of sales, starting with the Nasdaq. But the cold shower of the increase in work subsidies in the US as well as the slowdown of oil and other commodities they did justice to easy optimism about the stock market recovery. And so the managers are left with only two safe havens: fixed income, destined to offer increasingly meager returns. And gold, the shield against financial storms which does not betray even on this occasion.
This morning the price of the yellow metal, also favored by pressure on the US currency, it reached $1.894 on the heels of the fifth increase in a row near new nine-year highs. An increase, equal to about 20% since the beginning of the year, which follows the trend of Covid -19 quite faithfully but which, points out James Streel of HSBC, one of the world's leading yellow metal dealers "began before the pandemic and promises, given the volumes, to last".
In June in specialized ETFs in gold, 5,6 billion of new capital flowed, equivalent to 104 tons in bullion, bringing the total to 3.621 tons worth more than $200 billion according to the World Gold Council. The statistical picture is completed with the increase in inventories in the first six months to 734 tons, despite the crisis in consumption by the jewellery, now in its fifth year of decline.
Numbers that could be submerged by the wave of recent days, according to Carsten Menke of Julius Baer: “The upward race will continue until the virus is brought under control. But Covid-19 is not the only reason for the rise: among the other reasons that divert investments towards the precious metal, interest rates below zero and, in perspective, the possible risk of inflation in the face of massive liquidity injections”.
These will be the drivers that can explain the prices beyond the historical level of 1.900 dollars now one step away, even if Mr. Steel does not exclude that, once the euphoria is over, the yellow metal could go back to around 1,700 dollars.
“But we are optimistic – replies George Cheveley of Ninety One – because prices are receiving adequate support thanks to the enormous quantitative easing, both monetary and fiscal, put in place by governments and which is destined to continue over the next two years”. For multiple reasons. Starting from the policy of the large companies in the sector, such as Barrick and Newmont, now concentrated on generation of margins and cash flows rather than just increasing volumes, whatever the cost.
Gold stocks also offer a low correlation to the markets and therefore are a great way to diversify your portfolio. In this sense it is important to adopt a long-term perspective. Stocks are more volatile than gold but tend to show greater leverage when commodity prices rise. This brings some volatility, but in the long run it generates very attractive returns.
In short, beyond the "fashion" or the fear caused by the crisis, the sector seems in a position to fulfill its role of stable guardian of the portfolio. But, at the wheel of the yellow metal, silver is also lagging behind. According to Wisdom Tree analysts, “even silver has awakened after hibernation”. “We believe – is the thesis – that silver may outperform gold if the stop of flights that complicated the movement of physical gold were to reappear”.
For those who want to bet on the possession of physical ingots and coins the “Lingotto Account” is now fully functional which works on the infrastructure developed by Confinvest, listed on the AIM, which has developed, on the traditional trade of physical gold intermediary, a digital solution which allows you to invest (and even withdraw) directly from your current account in operations on the 'gold. A form of investment that is spreading, as confirmed by the growth of the stock: approximately +50% since the beginning of 2020.
