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Higher rates won't stop gold.
Published on 03.04.2017 21:18

The gold price is treading water today, failing to find a direction but according to some, a further break to the upside is inevitable as the year unfolds.

According to James Luke, fund manager at Schroders, the market has got it all wrong, and higher interest rates in the US will not be a burden on the gold price and if history is anything to go by the precious metal will rise right alongside interest rates,

"Although past performance is not a reliable indicator of future results, the gold price has tended to rise from the beginning to the end of Federal Reserve hiking cycles. In the last four instances when the Fed embarked on a hiking cycle, in three of the four instances gold saw +10% to +20% returns from beginning to end.”Mr Luke said

 

“The environment for gold investments remains positive. In the background, global record debt burdens have not magically vanished. These make global growth highly sensitive to any real increase in interest rates and the cost of servicing these debts. He added.

Also according to Mr Luke, another driver of the gold price will be when investors begin to diversify their portfolios away from Assets such as real estate and the stockmarket to reduce exposure and mitigate risk,

“Given investors’ high exposure to the traditional asset classes, there is an urgent need to find uncorrelated and attractive alternative investments. Liquid and tangible portfolio diversification options are limited, making gold and gold related investments unique and of use to many investors”. He said.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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