WGC Highlights Relevance of Gold as a Strategic Asset

SEATTLE (Scrap Monster): The latest report published by the World Gold Council (WGC) highlights the relevance of gold as a strategic asset in the U.S.

According to WGC, gold has become more relevant than ever for institutional investors. The investors in the developed markets are likely to be impacted by the effects of quantitative easing and the low interest rates for years to come. The institutional investors are seen embracing alternatives to traditional assets. Since 2001, the worldwide investment demand for gold has grown 15% per year. Incidentally, the share of non-traditional assets among the U.S. pension funds has increased to nearly 30% over the past several years, the WGC report said.

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Many investors have endorsed gold’s role as a diversifier, on account of its low correlation to most of the other mainstream assets. Gold is also considered as an effective hedge against systemic risks and stock market declines. In addition, gold has delivered protection to investors from extreme inflation. Gold’s price has surged higher by 15% on an average during years when inflation has been higher than 3%. Also, gold returns have outpaced the U.S. Consumer Price Index (CPI) over the long term.

The gold demand has been driven by expansion of wealth. This also has had a positive effect on jewellery, bar and coin demand. The share of gold demand from India and China has almost doubled from 25% in the early 1990s to over 50% in recent years.