London, July 20 (HNA) – Gold had a remarkable performance in the first half of 2020, increasing by 16.8 percent in US-dollar terms and significantly outperforming all other major asset classes, according to a research done by Goldhub.
“By the end of June, the LBMA Gold Price PM was trading close to US$1,770/oz, a level not seen since 2012, and gold prices were reaching record or near-record highs in all other major currencies” read the research.
Though equity markets around the world rebounded sharply from their Q1 lows, the high level of uncertainty surrounding the COVID-19 pandemic and the ultra-low interest rate environment supported strong flight-to-quality flows.
Like money market and high-quality bond funds, gold benefited from investors’ need to reduce risk, with the recognition of gold as a hedge further underscored by the record inflows seen in gold-backed ETFs.
The Covid-19 pandemic is having a devastating effect on the global economy. The IMF is currently projecting a 4.9 percent contraction in global growth in 2020, with high levels of unemployment and wealth destruction.
There is a growing consensus that a swift V-shaped recovery is morphing into a slower U-shape recovery or, more likely, the possibility that a recovery in H2 is short-lived as recurring waves of infections set the global economy back, resulting in W-shaped recovery.
For investors, this is not only keeping uncertainty levels high but may also have a long-lasting impact on their portfolio performance. Against this backdrop, we believe that gold can be a valuable asset: it can help investors diversify risks and may positively contribute to improving risk-adjusted returns.