Looking at Exhibit 2, we can see that the S&P GSCI® Gold TR, which measures the returns accrued from investing in fully collateralized gold futures contracts, has been in a declining trend. It has lost nearly 8.91% and 9.78% over the one- and three-year periods ending in September 2014, respectively.
There has also been a shift in the sentiment toward investments in equity and bond markets because of higher returns. These all are included as some of the reasons for the decline in the price of gold after the 11-year bull run. However, with the ongoing economic crisis in Europe and among the emerging markets, gold may still benefit as a safe haven hedging tool.
Exhibit 2: S&P GSCI Gold TR
Source: S&P Dow Jones Indices LLC. Data as of Oct. 15, 2014. Charts and tables are presented for illustrative purposes. Past performance is no guarantee of future results.
This article was written by Utkarsh Agrawal, index analyst, S&P BSE Indices.
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