Inflation expectations remain well above the average of the past almost two decades. More persistent and higher inflation would offset the effect of any rise in interest rates, causing real rates to remain low or negative.
The risk of lower real rates, a weaker than expected post-stimulus economic recovery, higher inflation, a weaker dollar, extreme debt levels, the final bursting of asset price bubbles and other unintended consequences of the massive liquidity injected into the financial system are all factors that may support higher gold prices in the longer-term.
It is not hard to imagine an environment where more than one of these risks could come into play, significantly increasing gold’s appeal as a safe haven, inflation hedge and portfolio diversifier.
MVIS Global Junior Gold Miners Index
30/06/2020-30/06/2021
Source: MV Index Solutions. All values are rebased to 1,000. Data as of 30 June 2021.
Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Financial Times, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.
The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.