Their motivations and their methods are different, however. Sovereign funds see gold as an inflation hedge with a low correlation to other financial assets, and they use exchange-traded funds, gold futures and gold swaps as investment vehicles, the Invesco report says. Central banks view the metal more as an alternative to the $14 trillion of global debt with negative yields and as a way of reducing their reserves’ exposure to the dollar. They use mostly physical gold holdings.
But the direction of travel is the same. “It is only a matter of time” until gold reaches a record high, Citigroup Inc. analysts said in a report this week. Gold bugs can rejoice that the smart money of sovereign funds and central banks is with them. The cheerleaders for equities may want to think again.
This article was provided by Bloomberg.