As an asset, gold is entirely speculative. It provides no income or dividends and has few industrial or medical applications. Investors buy it only in the confidence that humans' peculiar and enduring fascination with the lustrous metal will ensure its value through the decades and centuries to come.
Unlike other securities, its price is not dictated to any large extent by supply and demand. "Gold trades more like a currency and its price is driven more by monetary considerations such as inflation, interest rates and exchange rates," writes Nitesh Shah, commodity strategist at ETF Securities. As "Trumpflation" expectations grow, along with anticipation that the U.S. Federal Reserve will begin hiking interest rates more rapidly next year, the gold price has duly fallen. Even a new Sharia standard for investing in gold, which could see some of the $2 trillion currently invested in Islamic finance assets reallocated to physical metal and other products, the price impact would be limited, said Shah.
Its price may have fallen but people continue to buy gold. It has always been a hedge against fears of inflation, devaluation in paper currencies, and has outperformed (as a Federal Reserve Board study has found) during periods of market volatility.
Rather, it is how we hold it that is changing. According to the World Gold Council, inflows into exchange-traded products -- a type of security -- were the main reason for the increase in demand during the third quarter of this year, while demand for physical gold in the form of bullion bars, coins, and jewellery fell sharply.
Across the world, and even within Europe, there are different attitudes to holding physical gold. Citizens in China and India -- by far the world's largest markets -- and even Germany, hold much more than others. The UK holds hardly any. Why is this? ...
... For the remainder of the report:
http://www.cityam.com/255143/why-do-some-nati...-hold-more-gold
