FXTM: gold “a better alternative to many other asset classes”


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(Kitco News) – Gold remains an “attractive investment” even after prices hit multi-week highs, FXTM said in an analysis released Monday.

Spot gold hit $ 1,757 an ounce early Monday, bringing it near the multi-year high of just over $ 1,764 hit on May 18. As of 9:29 am EDT, spot gold was up $ 13.15 for the day to $ 1,755.40 an ounce.

The price hike coincided with a record rise in coronavirus cases around the world and a surge in gold inflows for the SPDR Gold Shares exchange-traded fund on Friday, according to a report by Hussein Sayed, chief market strategist at FXTM.

Sayed pointed out that some investors don’t like gold as an asset class because it doesn’t earn any interest. However, the strategist continued, these investors may find the precious metal “a better alternative to many other asset classes” in the current macroeconomic environment.

“The stock rally is clearly on the decline and there isn’t much incentive to keep the market bullish any longer,” Sayed wrote. “Stock prices have already taken into account actions taken by central banks around the world and another big round of stimulus is not likely at this point. Assuming the S&P 500 stays in the 3,000-3,200 range until the end of the year, it will trade at a price / earnings multiple of 24-26 times for 2020, and 19-20 times for the end of 2021. It is considered the most expensive market since the dot.com bubble.

In addition, the 10-year US real yield, which takes inflation into account, is in negative territory. Real yields in Europe are even lower, said Sayed. The strategist called this “terrible news” for people approaching retirement as pensions will lose value.

“And with the trillion dollars in government and central bank stimulus since the onset of COVID-19, we shouldn’t be surprised if inflation starts to rise slightly,” Sayed said. “It will be another big blow for savers.”

All of this “should make gold an excellent hedge against negative returns, currency devaluation, an unexpected surge in inflation or deflation, poor economic performance and shocks in the stock markets,” Sayed concluded. .

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.


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