Gold Council recommends taking a wider view on proposed US Federal Reserve Interest Rate rises
The World Gold Council has moved to remind investors of the important part Gold continues to have as part of their investment portfolio. The World Gold Council is concerned that investors are losing sight of the many positive attributes of Gold and focussing too closely on the single measure of the US Federal Reserve interest rate. The Gold Council recommends investors look beyond the single measure of interest rates and remember the other attributes that make gold an appealing investment option for so many.
For some time now world markets have become transfixed upon the potential for a rise in the Federal Reserve interest rate, which has been kept at historically low rates for a number of years now, and the impact of this rise upon investors and global markets. Many see this proposed increase as the first sign of a fully fledged recovery in world markets and a return towards what is considered more normal interest rates.
This has many implications for investors most notably of course for savers who have arguably been hit hardest by the perennially low interest rates offered over the past few years. Spurred by the potential for interest rate increase other investors have naturally begun to look away from the traditional safe haven of gold and this is where the World Gold Council urges caution.
The Gold price in 2015 has been on an overall downward trend with negative impacts being felt from world events such as the Chinese economic slowdown, leading to a drop in demand from the world’s second largest economy and also from the continuing strengthening of the Dollar, the prime currency that gold is traded in and linked to.
Gold has historically enjoyed a status as a safe haven primarily due to its intrinsic value around the world and has performed well in the face of historic economic downturns. This is not to say that in times of economic prosperity the gold price has not maintained a respectable level, since the year 2000 gold saw an almost uninterrupted rise in price which saw off the worst of the economic recession in 2007/08.
This is due to the complex demand for gold which is connected to many more factors than simply the interest rate set by the US Federal Reserve. The world gold price is driven by many more factors such as industrial demand. Gold holds a status as one of the best conductors and heat insulators that is available in the electronics industry. Gold also of course has demand from the jewellery sector and enjoys a coveted status in almost every culture around the world. Economic recovery and new growth is likely to only lead to an increase in demand for gold in the longer term.
Many would argue that gold still has an important part to play in asset portfolios as a diversifier and as demand for gold is likely to increase alongside economic recovery the long term forecast is still favourable, gold has always been and will remain a longer term investment focussed more on asset protection than on short term gains.