Strong Fundamentals Back Gold's Uptrend


"Gold retained its luster as a protector of wealth."

Mixed economic news around the world, concerns over a double dip recession and significant fiat currency weakness meant gold retained its luster as a protector of wealth during the second quarter 2010, according to the World Gold Council's (WGC) latest Gold Investment Digest (GID). The quarter recorded significant net inflows into various gold-backed investment vehicles, as investors sought to harness gold's investment benefits at a time of weakness and pronounced volatility in other asset classes.

The report, published July 27, 2010, showed:
  • Heightened investor activity supported an upward trend in the gold price throughout the quarter.
  • Investors bought 273.8 net tons of gold via exchange traded funds (ETFs) in Q2 2010. This represents the second largest quarterly inflow on record.
  • In the early part of the second quarter, many currencies around the globe not only fell against the US dollar but also experienced higher levels of volatility.
  • Many assets, including global equities and commodities, experienced a period of pronounced volatility, in some instances surpassing levels seen during the first quarter of 2009. Gold price volatility, however, remained much lower.
  • In Q2 2010, the diversity of gold's demand base, less driven by industrial uses as many other commodities, meant that gold was one of the best performing commodities.
Juan Carlos Artigas, Investment Research Manager, World Gold Council commented: "During the second quarter, many financial assets, especially in Europe, suffered losses as risk aversion, credit concerns, and disappointing economic news around the world prompted investors to seek assets with little or no default risk, greater liquidity and lower volatility. As a result, gold was, once again, one of very few assets that exhibited a positive price performance during the period. . .Its price, relative to the price of various assets, is not overvalued by historical standards."

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