As investors look for ways to diversify a traditional equity and fixed-income portfolio in the new year, many are considering alternative assets like precious metals-related ETFs.
Maxwell Gold, director of investment strategy at ETF Securities, argued that the Goldilocks economy in 2018 may benefit gold.
“The global economy continues to chug along in a ‘just-right’ goldilocks scenario with steadily rising inflation and synchronized growth among developed and emerging economies. This backdrop has benefited equities over gold in 2017 while also resulting in stretched equity valuations and record low volatility. As the economy seems to be on cruise control, this complacency may see the probability of unforeseen risks disrupting the status quo increase. This may result in heightened demand for gold as a portfolio risk overlay in preparation for a correction or slowdown particularly while gold remains relatively cheap,” Gold said in a research note.
Additionally, an expanding global economy could also bolster consumer demand for jewelry and electronics, which could provide a floor for gold. Meanwhile, rising inflationary pressures will also rise in an expanding economy.