The Market Value of Gold is rooted in a diverse array of cultural traditions – gold has emotional and financial value which supports demand across generations and national boundaries. Gold is fashioned into jewelry and used by central banks and investors to manage financial risk. The self-balancing nature of the gold demand makes of it a sustained market.
Nearly half of global Demand for Gold comes from India and China. These markets share the belief that gold is propitious but, beyond that, there is a new generation of consumers for whom innovative designs created by talented goldsmiths, is a binding investment.
Jewelry has always been the main area of Demand for Gold. Prized for the Market Value of Gold as well as its beauty, jewelry has a universal status that remains constant. It accounts for 45 per cent of the Demand for Gold, but the source of this demand has shifted in line with the new dynamics of economic growth and wealth in the world.
The Demand for Gold shows no signs of declining, as it is driven by growing wealth and demographic shifts: by 2020 India and China combined will have one billion new urban consumers. These people are also experiencing a rise in income, which is uplifting the Demand for Gold.
If you have thought about investing in equities - think again! The rise in the Market Value of Gold in the first quarter of this year has been far higher than most equity markets.
The Market Value of Gold has gone up 9.2 percent so far this year, which surprised many analysts. Volatility is down and prices are up, and gold has defied the bearish experts.
In accordance with the World Gold Council, only a few assets went through a better feat: selected commodities and US real estate investment trusts.
Analysts also attribute the rise in the Market Value of Gold to the geopolitical situation in Asia, which created a quiver in equities. According to them, the geopolitical conditions in Iraq and Syria created a panic-like situation in oil and equity markets. On the other hand, apart from US and India, equity markets have not done very well. So as a result of low prices and low volatility the Demand for Gold rose. Gold proved to be a bargain investment and a hedge in uncertain times.
WGC thinks investors would benefit from gold as a hedge in their portfolios, regardless of whether they perceive this as a tactical retort to the current market environment or part of a long term strategy on risk management.
They note that the Market Value of Gold helps reduce long-term portfolio volatility by acting as a diversifier.
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