Gold Investment to React to Rates and Inflation: World Gold Council

SEATTLE (Scrap Monster): The World Gold Council (WGC), in its latest report, said that gold investments are likely to react to interest rates and inflation. The investors are expected to experience strong market swings and significant pullbacks.

According to WGC, the global stocks performed exceptionally well during the final two months of the previous year. The MSCI All World Index surged higher by nearly 20% over this period. However, rising Covid-19 cases and spread of the more infectious new variant of the virus made the markets cautious. The volatile political events in the U.S. also were feared to impact investment. However, the investors continued to maintain and expand their exposure to risk assets, despite the above factors.

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The WGC expects high stock prices and valuations, mainly driven by the very low level of interest rates worldwide. There are possibilities of strong market swings, if the vaccination drive fails to reach people as expected or if they are less effective than projected.

Historically, gold has performed well in the midst of equity market pullbacks and periods of high inflation. As per research, gold is expected to perform well even during periods of deflation. In short, such periods, typically characterized by low interest rates and high financial stress, tend to boost demand for gold.