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This week's topic: Old but Gold. Gold prices saw a turnaround from one of history's weakest quarters in 1Q21. This tends to happen when realised inflation is rising, demand is high and economies are re-opening. Read 'Alternatives: Gold 3Q21' report in full here.
Highlights from the 3Q21 CIO Insights Gold report:
Gold for currency hedging. This year, DM currencies have held up better than emerging Asian ones. The need to hedge currencies in Asia – amid rising inflation and virus resurgence – are boosting demand for gold among Asian investors.
Gold shines as a stable alternative investment. We see potential new demand for gold arising from central banks looking to raise their allocation as part of their reserve management. The recent high volatility and price drop in cryptocurrencies also present opportunities for gold to shine.
It will be a production growth story this year for gold and silver miners. Mining companies have expressed upbeat exploration progress and M&A opportunities. Gold mining securities should benefit from higher demand and rising prices. We (CIO) prefer larger, senior miners which demonstrate better cost and portfolio optimisation, and carry higher ESG ratings.
THE DBS CIO OFFICE ...
Remains constructive on the med*um-term outlook for gold. The forecasts for gold remain at USD2,000/oz for the rest of the year.
