Reinhard Panse's Perspectives
Reinhard Panse's Perspectives
Podcast
30.4.2024
While other commodities such as silver and oil are far from their record highs, gold is currently experiencing a real boom. Interestingly, the metal is behaving contrary to its previous correlation with the real interest rate in the USA.
As gold bullion is non-interest bearing, investors tend to turn to inflation-protected US government bonds when yields are more promising and to gold when real interest rates fall again. Since 2021, however, both sides have been on the rise, bringing movement to what was thought to be a reliable correlation.
The reason for this could be the outbreak of the Putin war in 2022, which presented governments in Europe and the US with financial hurdles due to the need to rearm and support Ukraine. This could have unsettled investors and prompted them to invest in gold, which cannot be inflated away.
In addition to inflation protection, another advantage is the favorable valuation compared to equities. While the expected return on the US equity market is less than 0% p.a. until 2034, the precious metal is convincing with an expected price increase of 10% p.a. With the country's already difficult economic situation, its high level of debt and the existing risk of recession in the coming months, it is not surprising that investors are increasingly turning to physical assets.
But the upswing is not just coming from America: in China, prices for 10-year government bonds have reached a new high and interest rates a record low. Following the bursting of the historically unique real estate bubble, the Chinese have lost a great deal of confidence in the domestic market. As a result, real estate purchases are not popular, savings deposits are not risk-free and share purchases are not preferred either thanks to weak performance. Not least because investing in foreign assets is becoming increasingly difficult for the population. Accordingly, gold remains the safest option and is becoming increasingly popular.
As a result, the gold rally should continue to be promising - together with the European and Japanese stock markets.
You can read the full capital market outlook here.
Reinhard Panse's Perspectives
30.4.2024
Reinhard Panse
Unlike other commodities, gold is currently experiencing a boom - a development that, on closer inspection, is favored by many factors. You can read about them here.
While other commodities such as silver and oil are far from their record highs, gold is currently experiencing a real boom. Interestingly, the metal is behaving contrary to its previous correlation with the real interest rate in the USA.
As gold bullion is non-interest bearing, investors tend to turn to inflation-protected US government bonds when yields are more promising and to gold when real interest rates fall again. Since 2021, however, both sides have been on the rise, bringing movement to what was thought to be a reliable correlation.
The reason for this could be the outbreak of the Putin war in 2022, which presented governments in Europe and the US with financial hurdles due to the need to rearm and support Ukraine. This could have unsettled investors and prompted them to invest in gold, which cannot be inflated away.
In addition to inflation protection, another advantage is the favorable valuation compared to equities. While the expected return on the US equity market is less than 0% p.a. until 2034, the precious metal is convincing with an expected price increase of 10% p.a. With the country's already difficult economic situation, its high level of debt and the existing risk of recession in the coming months, it is not surprising that investors are increasingly turning to physical assets.
But the upswing is not just coming from America: in China, prices for 10-year government bonds have reached a new high and interest rates a record low. Following the bursting of the historically unique real estate bubble, the Chinese have lost a great deal of confidence in the domestic market. As a result, real estate purchases are not popular, savings deposits are not risk-free and share purchases are not preferred either thanks to weak performance. Not least because investing in foreign assets is becoming increasingly difficult for the population. Accordingly, gold remains the safest option and is becoming increasingly popular.
As a result, the gold rally should continue to be promising - together with the European and Japanese stock markets.
You can read the full capital market outlook here.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
