Why a brewing global economic storm is turning gold into the perfect trade

Златото е на път да се възползва от "перфектната буря" заради по-малкото инвестиционни алтернативи и по-големите рискове при акциите.

Gold is poised to benefit from a “perfect storm” of fewer viable investment alternatives and bigger risks, according to an industry group that is the sponsor of one of the world’s biggest gold exchange-traded-funds.

Analysts have interpreted weak Japanese government bond demand—such as that seen for a 10-year auction earlier this week—as a sign that investors are losing faith in “unconventional monetary policies,” said the World Gold Council in its August monthly report.

“In this environment, we believe investors are using gold to hedge portfolio risk as they add more stocks and low quality bonds to their asset mix,” said the World Gold Council.

The World Gold Council, which created the SPDR Gold Trust Fund GLD, +0.17% GLD, +0.17% points out that gold has been one of the year’s best-performing assets.

Central banks are increasingly throwing all they can at global economies to stimulate growth, said The World Gold Council, which pointed to indications by the European Central Bank that it will expand stimulus. On Thursday the Bank of England cut rates and expanded its asset-buying program.

The group took aim at one investment option for investors, which it said is really no option at all: high-quality sovereign debt. More than a third is sitting on central bank balance sheets as part of asset-buying programs, less than 40% has a positive yield and “available” to average investors, and only 17% yields more than 1% as this chart shows:

Investors are adding risk to portfolios amid record equity and corporate-bond inflows, but valuations across U.S. markets have hit new historical records, the group added.

This search for returns is pushing investors toward gold-backed exchange-traded-funds this year, adding 630 metric tons (U.S. $25 billion) through July 31, 2016, bringing global gold holdings to 2,240 metric tons. That is still below their 2012 high, meaning there is room to jump on in.

The Market Anthropology blog also came out in favor of gold, saying the dollar DXY, -0.16% looks stretched and that should set gold up for more gains. Even with a gain of nearly 30% this year, the current rally in gold will probably break its cycle high of $1,924 an ounce reached back in September 2011, said the blog.

“The bottom line is despite healthy gains in precious metals this year, we believe significant returns lie ahead as a weaker U.S. dollar and declining real yields target their respective lows from 2011,” said Market Anthropology.

“Considering that gold already trades close to $1400 an ounce while the dollar remains historically stretched, the prospects for precious metals continue to appear attractive to us as the markets catalytic converter for lower real yields has much further room to fall,” wrote the blogger.