Private and institutional investors alike invest in gold – especially in times of crisis. The price of the precious metal has long since recovered from its slump at the beginning of the pandemic in March 2020. Investment professionals expect the gold price to rise further in the medium term.
Gold is in great demand, especially in times of crisis.
“In times of zero interest rates, investors are looking for alternative investment opportunities. In addition to investing in raw materials, these include especially precious metals and especially gold. Due to the numerous political crises that have always existed and will also exist, gold is the currency in crisis take into account the risk appetite in the investor’s portfolio “, put it in a nutshell by Philipp Karl Maximilian Lindmayer and Hans-Ulrich Dietz in the book” Geldanlage und Steuer 2020 “(page 228).
Short, medium and long term financial planning
Sensible financial planning means dealing in detail with your own life plans. The period in which the respective plans are to be implemented (and financed) largely determines which investment opportunities exist.
The majority of professional investors in Germany and Great Britain believe that this rule also applies in the current crisis. As an online survey of 50 institutional investors and asset managers carried out on behalf of the Global Palladium Fund in January 2021 showed 32 percent with the price of gold rising between three and five percent this year,
another 32 percent with an increase of between five and ten percent.
17 percent even with an increase of over ten percent and
only five percent believe the price of gold will fall.
For the silver price, 25 percent assume an increase of between three and five percent or five and ten percent. Eight percent say it will rise by more than ten percent, and 16 percent of professional investors assume that the value of the precious metal will fall.
Geopolitical risks drive gold prices
As a reason for the current assessments of the gold market, the survey gives the gold rally as well as the increasing industrial demand. In addition, the relationship between the US and China will remain difficult even under US President Biden. There are also other geopolitical risks and a growing risk of inflation. For the Springer authors Lindmayer and Dietz are among others
the tensions in the Persian Gulf area between the US and Iran,
Brexit and the related consequences
the effects of the lack of stability in the financial sector
and the continued low interest rate policy of the ECB with the result of zero and negative interest rates on the capital market
further drivers of this development.
For example, 40 percent of institutional investors wholeheartedly agreed and 57 percent broadly agreed that the importance of gold may also increase because some countries are looking for alternatives to the US dollar to conduct international trade. Gold is seen by many as “non-political” money because it is not issued by a central bank. “This could also have a positive impact on the gold price,” it says.
Gold as part of a diversified investment
In terms of diversifying capital investments, Lindmayer and Dietz recommend a proportion of precious metals, especially in the form of gold, of up to ten percent. Because “a comprehensive wealth concept must take into account all important personal and factual criteria”, according to the authors in the book chapter “Long-term wealth planning to secure your goals” (page 22). These criteria include: existing financial and material assets, the investor’s mentality, personal and professional goals in life, willingness to take risks, tax situation and building up or supplementing the retirement pension.