Weekly Gold Review: Yellow Metal Consolidates Around Five Week High

13 Aug 2022 , 12:38 PM

COMEX Gold futures consolidated above $1800 per ounce mark. The metal stabilized at five week high but rising equities capped the gains. The World Gold Council in its latest Investment Update stated that in historical periods of higher rates and high inflation, gold has generated attractive returns relative to stocks and bonds and has improved risk-adjusted returns for Indian investors. Citing historical data, the update suggested that gold has offered attractive returns during Indias monetary-tightening cycles. In five rate-hiking cycles since 2004 gold in Indian rupees averaged an annualised return of 19.5%, outperforming other major assets. In India gold is perceived as a hedge against inflation: studies have shown that a 1% increase in inflation leads to a 2.6% rise in short-term demand for gold, the update noted. By way of example, over the past 41 years gold has delivered an average annual return of 10% in rupees, clearly outperforming CPI inflation, which grew by an average of 7.3% over the same period. The council said in its concluding remarks that Central banks around the world have responded to rising inflation. The US, UK and Canada have raised interest rates, while the US Federal Reserve and European Central Bank (ECB) have rolled back their emergency pandemic support for the economy. But if the RBI like other central banks follows suit – this could result in large market swings and potentially result in economic slowdown. Against this backdrop, gold may offer investors a source of return and effective diversification. Powered by Commodity Insights