Everything is changing all the time in these markets. It feels slightly breathless. Perhaps that’s why my thoughts are turning to cool, calm gold: something that is as popular today as it was in Ancient Egypt. Through it all, gold endures.

I’m seeing more and more investors dusting themselves off and declaring, with some bemusement, that they are back to break even for the year. This return to previous valuations is odd, given that global financial health has deteriorated, with debt spiking across economies around the world.

It’s great that share prices are recovering right now but we will be tested again in the future. The more I dig into gold the better I like it as an investment over the next few years - here’s an argument for why you should have a little exposure to the yellow metal, along with a look at some likely candidates.

Bull point one: game-changing monetary policies

Despite the rally in equities, gold has outperformed the market this year, increasing in value by 10.91% from 1 January to 17 April. In Q1 of 2020:

  • Gold ETFs saw the highest quarterly inflows for four years. Holdings of these products reached a record high of 3,185t by the end of the quarter.
  • Central banks continued to amass gold. Global gold reserves grew by 145t in Q1 (although this is expected to slow).
  • Total Q1 supply fell 4% as coronavirus lockdowns hit mine production and gold recycling.

These factors helped push the US dollar gold price to an eight-year high. The price also reached new record highs in Indian rupees and Turkish lira, among others. But that’s just this year - there are powerful factors that can continue to drive the gold price in the medium term.

It’s getting harder all the time to dig up new gold, but demand continues to increase. At the same time, epic central bank asset purchases must be having some kind of weakening effect on fiat currencies (which are used to price gold).

These dynamics paint a favourable picture for the gold price. We can see that when the global financial system broke and central barks embarked on their colossal (and ongoing) asset repurchase programs, the price of gold shot up.

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There appears to be a strong positive correlation between the amount of debt in the system and the price of gold…

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