Gold Outlook 2021

https://www.gold.org/goldhub/research/outlook-2021
14 January 2021

Economic recovery and low interest rates set the tone

The COVID-19 pandemic raised uncertainty by compounding existing risks and creating new ones. But by the end of last year, investors were optimistic that the worst was over.

Looking ahead, we believe that investors will likely see the low interest rate environment as an opportunity to add risk assets in the hope that economic recovery is on the immediate horizon. That said, investors will likely also be navigating potential portfolio risks including:

  • ballooning budget deficits
  • inflationary pressures
  • market corrections amid already high equity valuations.

In our outlook for gold, we believe investment demand will remain well supported while gold consumption should benefit from the nascent economic recovery, especially in emerging markets.





Gold gained from risk, rates and momentum
Gold was one of the best performing major assets of 2020 driven by a combination of:

high risk
low interest rates
positive price momentum – especially during late spring and summer.
Gold also had one of the lowest drawdowns during the year, thus helping investors limit losses and manage volatility risk in their portfolios (Chart 1).

By early August, the LBMA Gold Price PM reached a historical high of US$2,067.15/oz as well as record highs in all other major currencies (Table 1). While the gold price subsequently consolidated below its intra-year high, it remained comfortably above US$1,850/oz for most of Q3 and Q4, finishing the year at US$1,887.60/oz.

Interestingly, gold’s price performance in the second half of the year seemed to be linked more to physical investment demand – whether in the form of gold ETFs or bar and coins – rather than through the more speculative futures market. For example, COMEX net long positioning reached an all-time high of 1,209 tonnes (t) in Q1 but ended the year almost 30% below this level. We believe this was due to the dislocation that COMEX futures experienced in March relative to the spot gold price, making it more expensive to hold futures compared to other choices.

Investors’ preference for physical and physical-linked gold products last year further supports anecdotal evidence that, this time around, gold was used by many as a strategic asset rather than purely as a tactical play.

Gold Outlook Chart 1: Gold outperformed major assets in 2020
Yearly returns and maximum drawdowns of select assets*

Return
Download
Maximum drawdown
Annual return
NASDAQ
Gold
S&P 500
EM stocks
Global Treasuries
US Corporates
US Treasuries
US HY
EAFE stocks
Commodities
Oil
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Sources: Bloomberg, ICE Benchmark Administration, World Gold Council; Disclaimer

*As of 31 December 2020. Returns based on the LBMA Gold Price, Bloomberg Barclays US Treasury Index and Global Treasury Index ex US, Bloomberg Barclays US Corporate and High Yield Indices, MSCI EM Index, Bloomberg Commodity TR Index, MSCI EAFE Index, S&P 500 & NASDAQ Indices, and Bloomberg Oil TR Index. Maximum drawdown computed relative to the 2020 initial value for each respective index.




Gold Outlook Table 1: The gold price is near or above record highs across key currencies
Gold price and annual return in key currencies*

USD
(oz) EUR
(oz) JPY
(g) GBP
(oz) CAD
(oz) CHF
(oz) INR
(10g) RMB
(g) TRY
(oz) RUB
(g) ZAR
(g) AUD
(oz)
2020 return 24.6% 14.3% 18.4% 20.8% 22.4% 13.8% 27.6% 17.0% 55.6% 48.4% 30.9% 13.5%
Year-end price 1,888 1,543 6,266 1,381 2,405 1,669 44,343 396.9 14,030 4,489 891 2,446
Record high 2,067 1,746 7,013 1,573 2,749 1,883 49,803 461.5 16,518 4,907 1,165 2,863
Date† 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Nov 2 Nov 6 Aug 6 Aug
Source: Bloomberg, ICE Benchmark Administration, World Gold Council

*As of 30 December 2020. Based on the LBMA Gold Price PM in local currencies: US dollar (USD), euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), Indian rupee (INR), Chinese yuan (RMB), Turkish lira (TRY), Russian rouble (RUB), South African rand (ZAR), and Australian dollar (AUD).
† All dates correspond to 2020.



Gold investment to react to rates and inflation
Global stocks performed particularly well during November and December, with the MSCI All World Index increasing by almost 20% over the period. However, rising COVID-19 cases and a reportedly more infectious new variant of the virus created a renewed sense of caution. Yet, neither this nor the highly volatile US political events during the first week of 2021 have deterred investors from maintaining or expanding their exposure to risk assets.

The S&P 500 price-to-sales ratio is at unprecedented levels (Chart 2) and analysis by Crescat Capital suggests that the 15 factors that make up their S&P 500 valuation model are at – or very near – record highs. Going forward, we believe that the very low level of interest rates worldwide will likely keep stock prices and valuations high. As such, investors may experience strong market swings and significant pullbacks. These could occur, for example, if vaccination programmes take longer to distribute – or are less effective – than expected, given logistical complexities or the high number of mutations reported in some strains.

Gold Outlook Chart 2: Equity market valuations continue to climb
Price-to-sales ratio for the S&P 500*

Price-to-sales
Download
2000
2010
2020
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Sources: Bloomberg, World Gold Council; Disclaimer

*As of 11 January 2021. Based on weekly data.



In addition, many investors are concerned about the potential risks resulting from expanding budget deficits, which, combined with the low interest rate environment and growing money supply, may result in inflationary pressures. This concern is underscored by the fact that central banks, including the US Federal Reserve and European Central Bank, have signalled greater tolerance for inflation to be temporarily above their traditional target bands.1

Gold has historically performed well amid equity market pullbacks as well as high inflation. In years when inflation was higher than 3%, gold’s price increased 15% on average. Notably too, research by Oxford Economics2 shows that gold should do well in periods of deflation. Such periods are typically characterised by low interest rates and high financial stress, all of which tend to foster demand for gold.

Further, gold has been more effective in keeping up with global money supply over the past decade than US T-bills, thus better helping investors preserve capital (Chart 3).

Gold Outlook Chart 3: Gold has kept up with money supply growth
Global M2 growth, US 3m T-bill total return, gold price*

Index level
US$/oz
Download
3-month T-Bill (lhs)
Global M2 (lhs)
Gold (rhs)
2000
1975
0
500
1,000
1,500
2,000
2,500
0
400
800
1,200
1,600
2,000
Sources: Bloomberg, ICE Benchmark Administration, Oxford Economics, World Gold Council; Disclaimer

*As of 31 December 2020. Based on global M2 cumulative growth measured in USD, total return index of 3-month US T-bill and LBMA Gold Price PM USD.



EM economic recovery to benefit consumer demand
Market surveys indicate that most economists expect growth to recover in 2021 from its dismal performance during 2020.3 And although global economic growth is likely to remain anaemic relative to its full potential for some time, gold’s more stable price performance since mid-August may foster buying opportunities for consumers.

The economic recovery may particularly realise in countries like China, which suffered heavy losses in early 2020 before the spread of the pandemic was controlled more effectively than in many western countries. Given the positive link between economic growth and Chinese demand, we believe that gold consumption in the region may continue to improve.

Similarly, the Indian gold market appears to be on a stronger footing. Initial data from the Dhanteras festival in November suggest that while jewellery demand was still below average, it had substantially recovered from the lows seen in Q2 of last year.

However, with the global economy operating well below potential and with gold prices at historical high levels, consumer demand may remain subdued in other regions.

Central bank demand not going away
After positive gold demand in H1, central bank demand became more variable in the second half of 2020, oscillating between monthly net purchases and net sales. This was a marked change from the consistent buying seen for many years, driven in part by the decision of the Central Bank of Russia to halt its buying program in April. Nonetheless, central banks are on course to finish 2020 as net purchasers (although well below the record levels of buying seen in both 2018 and 2019). And we don’t expect 2021 to be much different. There are good reasons why central banks continue to favour gold as part of their foreign reserves (see our Central Bank Gold Reserve Survey 2020) which, combined with the low interest rate environment, continue to make gold attractive.

Mine production likely to improve
Recovery in mine production is likely this year after the fall seen so far in 2020. Production interruptions peaked during the second quarter of last year and have since waned.

While there is still uncertainty about how 2021 may evolve, it seems very likely that mines will experience fewer stoppages as the world recovers from the pandemic. This would remove a headwind that companies experienced in 2020 but that is not commonly part of production drivers. Even if potential second waves impact producing countries, major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.

Putting it all together
The performance of gold responds to the interaction of the various sectors of demand and supply, which are, in turn, influenced by the interplay of four key drivers (Focus 1). In this context, we expect that the need for effective hedges and the low-rate environment will keep investment demand well supported, but it may be heavily influenced by the perceptions of risk linked to the speed and robustness of the economic recovery.

Focus 1: Drivers of gold performance
Gold’s behaviour can be explained by four broad sets of drivers:

Economic expansion: periods of growth are very supportive of jewellery, technology and long-term savings
Risk and uncertainty: market downturns often boost investment demand for gold as a safe haven
Opportunity cost: interest rates and relative currency strength influence investor attitudes towards gold
Momentum: capital flows, positioning and price trends can ignite or dampen gold’s performance
Focus 1
At the same time, we anticipate that the economic recovery in some emerging markets, such as China and India, may limit some of the headwinds the gold market experienced in 2020 caused by extremely weak gold consumption.

Using Qaurum, our gold valuation tool (Focus 2), we analysed the performance of gold as implied by five different hypothetical macroeconomic scenarios provided by Oxford Economics. These are: 4

a steady economic recovery (their base-case scenario)
a delayed recovery
a deep financial crisis
a rapid economic upturn
a global second wave.
The results of the analysis suggest that, in general, gold may see a positive, though more subdued, performance in 2021.5 This may be driven primarily by a recovery of consumer demand relative to 2020 as economic conditions improve. In addition, gold’s performance may be boosted further by the prolonged low interest rate environment which would all but remove the opportunity cost of investing in gold.

Alternatively, our valuation model suggests that a global economic relapse from COVID-19 or any other unforeseen risks could result in weak consumer demand, thus creating a headwind for gold’s performance. However, a risk-off environment such the one captured by Oxford Economics’ “deep financial crisis” or “global second wave” may result in strong gold investment demand, which could offset low consumption as it did during 2020. Historically, this behaviour has occurred as investors look for high quality, liquid assets, such as gold, in these risk-off environments.

Focus 2: QaurumSM – Your gateway to understanding gold performance
Qaurum is a web-based quantitative tool that helps investors intuitively understand the drivers of gold performance.

Behind its user-friendly interface, Qaurum is powered by the Gold Valuation Framework (GVF). An academically validated methodology, GVF is based on the principle that the price of gold and its performance can be explained by the interaction of demand and supply.

Accessible from Goldhub.com, the World Gold Council’s data and research site, Qaurum allows investors to assess how gold might react across different economic environments in three easy steps:

select a hypothetical macroeconomic scenario provided by Oxford Economics, a leader in global forecasting and quantitative analysis, or customise your own
generate forecasts of gold demand and supply, and view the impact of key macro drivers
calculate and visualise implied returns for gold.
Based on these, investors can use Qaurum to calculate the hypothetical performance of gold over the next five years as well as long-term 30-year returns implied by GVF and the available (or user-constructed) scenarios.

Additional details on GVF methodology can be found at Goldhub.com.

Download the Gold Market Outlook for 2021
1FT: Fed to tolerate higher inflation in policy shift (August 2020) and The ECB begins its shift to a new inflation goal (October 2020).

2Oxford Economics is a leader in global forecasting and quantitative analysis and a specialist in modelling.

3Bloomberg consensus forecasts are available by using the function ECFC <GO> in its data terminals.

4Visit Qaurum for important disclosure about Oxford Economics’ data, as well as a detailed description of each scenario; the assumptions underlying and data used for each scenario; and its respective hypothetical impact on gold demand, supply and performance.

5This is not an exhaustive list of possible outcomes. These five scenarios reflect key investor concerns captured by Oxford Economics’ Global Risk Survey. Hypothetically, improving market sentiment – for example, due to effective vaccination programmes or the containment of the more transmissible COVID-19 variant – could put downward pressure on gold’s price performance relative to the scenarios currently available on Goldhub.com. Investors can modify the inputs using Qaurum’s customisation function.

Important disclaimers and disclosures[+]

Rate this content:
Collections:
Gold Demand Trends
Gold Investor
Market update
Market primer
Investment case for gold
Investment update
Market focus
Conflict-free gold
Market:
China
Europe
India
Middle East & Turkey
USA
Sector:
Market insights
Supply
Gold production
Recycling
Demand
Jewellery
Investment
Technology
Central banks/official inst.
Related Publications

22 January, 2021
A review of China’s gold market in 2020

11 November, 2020
The relevance of gold as a strategic asset 2020 – Russia edition

10 November, 2020
Gold loans help India weather the COVID-19 storm

29 October, 2020
Gold Demand Trends Q3 2020

2 September, 2020
Gold deposit rates – a guidance paper

30 July, 2020
Gold Demand Trends Q2 2020

16 July, 2020
Online gold market in India

14 July, 2020
Gold mid-year outlook 2020

30 April, 2020
Gold Demand Trends Q1 2020
Goldhub Footer Menu
Goldhub
Data
Portfolio simulator
About Goldhub
Privacy
Contact us
Sitemap
Terms and conditions
©2021 World Gold Council

沪ICP备16026324号

公安备案号31010602004116
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Gold Hub- Gold Price & Gold Market Data and Research

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Chinese, Simplified

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Home Gold Outlook 2021
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Statement regarding COVID-19

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Gold Outlook 2021
14 January, 2021

Sectors: Market insights, Supply, Gold production, Recycling, Demand, Jewellery, Investment, Technology, Central banks/official inst.

Rate this content:
Economic recovery and low interest rates set the tone
The COVID-19 pandemic raised uncertainty by compounding existing risks and creating new ones. But by the end of last year, investors were optimistic that the worst was over.
Looking ahead, we believe that investors will likely see the low interest rate environment as an opportunity to add risk assets in the hope that economic recovery is on the immediate horizon. That said, investors will likely also be navigating potential portfolio risks including:
ballooning budget deficits
inflationary pressures
market corrections amid already high equity valuations.
In our outlook for gold, we believe investment demand will remain well supported while gold consumption should benefit from the nascent economic recovery, especially in emerging markets.
Gold gained from risk, rates and momentum
Gold was one of the best performing major assets of 2020 driven by a combination of:

high risk
low interest rates
positive price momentum – especially during late spring and summer.
Gold also had one of the lowest drawdowns during the year, thus helping investors limit losses and manage volatility risk in their portfolios (Chart 1).

By early August, the LBMA Gold Price PM reached a historical high of US$2,067.15/oz as well as record highs in all other major currencies (Table 1). While the gold price subsequently consolidated below its intra-year high, it remained comfortably above US$1,850/oz for most of Q3 and Q4, finishing the year at US$1,887.60/oz.

Interestingly, gold’s price performance in the second half of the year seemed to be linked more to physical investment demand – whether in the form of gold ETFs or bar and coins – rather than through the more speculative futures market. For example, COMEX net long positioning reached an all-time high of 1,209 tonnes (t) in Q1 but ended the year almost 30% below this level. We believe this was due to the dislocation that COMEX futures experienced in March relative to the spot gold price, making it more expensive to hold futures compared to other choices.

Investors’ preference for physical and physical-linked gold products last year further supports anecdotal evidence that, this time around, gold was used by many as a strategic asset rather than purely as a tactical play.

Gold Outlook Chart 1: Gold outperformed major assets in 2020
Yearly returns and maximum drawdowns of select assets*

Return
Download
Maximum drawdown
Annual return
NASDAQ
Gold
S&P 500
EM stocks
Global Treasuries
US Corporates
US Treasuries
US HY
EAFE stocks
Commodities
Oil
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Sources: Bloomberg, ICE Benchmark Administration, World Gold Council; Disclaimer

*As of 31 December 2020. Returns based on the LBMA Gold Price, Bloomberg Barclays US Treasury Index and Global Treasury Index ex US, Bloomberg Barclays US Corporate and High Yield Indices, MSCI EM Index, Bloomberg Commodity TR Index, MSCI EAFE Index, S&P 500 & NASDAQ Indices, and Bloomberg Oil TR Index. Maximum drawdown computed relative to the 2020 initial value for each respective index.




Gold Outlook Table 1: The gold price is near or above record highs across key currencies
Gold price and annual return in key currencies*

USD
(oz) EUR
(oz) JPY
(g) GBP
(oz) CAD
(oz) CHF
(oz) INR
(10g) RMB
(g) TRY
(oz) RUB
(g) ZAR
(g) AUD
(oz)
2020 return 24.6% 14.3% 18.4% 20.8% 22.4% 13.8% 27.6% 17.0% 55.6% 48.4% 30.9% 13.5%
Year-end price 1,888 1,543 6,266 1,381 2,405 1,669 44,343 396.9 14,030 4,489 891 2,446
Record high 2,067 1,746 7,013 1,573 2,749 1,883 49,803 461.5 16,518 4,907 1,165 2,863
Date† 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Nov 2 Nov 6 Aug 6 Aug
Source: Bloomberg, ICE Benchmark Administration, World Gold Council

*As of 30 December 2020. Based on the LBMA Gold Price PM in local currencies: US dollar (USD), euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), Indian rupee (INR), Chinese yuan (RMB), Turkish lira (TRY), Russian rouble (RUB), South African rand (ZAR), and Australian dollar (AUD).
† All dates correspond to 2020.



Gold investment to react to rates and inflation
Global stocks performed particularly well during November and December, with the MSCI All World Index increasing by almost 20% over the period. However, rising COVID-19 cases and a reportedly more infectious new variant of the virus created a renewed sense of caution. Yet, neither this nor the highly volatile US political events during the first week of 2021 have deterred investors from maintaining or expanding their exposure to risk assets.

The S&P 500 price-to-sales ratio is at unprecedented levels (Chart 2) and analysis by Crescat Capital suggests that the 15 factors that make up their S&P 500 valuation model are at – or very near – record highs. Going forward, we believe that the very low level of interest rates worldwide will likely keep stock prices and valuations high. As such, investors may experience strong market swings and significant pullbacks. These could occur, for example, if vaccination programmes take longer to distribute – or are less effective – than expected, given logistical complexities or the high number of mutations reported in some strains.

Gold Outlook Chart 2: Equity market valuations continue to climb
Price-to-sales ratio for the S&P 500*

Price-to-sales
Download
2000
2010
2020
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Sources: Bloomberg, World Gold Council; Disclaimer

*As of 11 January 2021. Based on weekly data.



In addition, many investors are concerned about the potential risks resulting from expanding budget deficits, which, combined with the low interest rate environment and growing money supply, may result in inflationary pressures. This concern is underscored by the fact that central banks, including the US Federal Reserve and European Central Bank, have signalled greater tolerance for inflation to be temporarily above their traditional target bands.1

Gold has historically performed well amid equity market pullbacks as well as high inflation. In years when inflation was higher than 3%, gold’s price increased 15% on average. Notably too, research by Oxford Economics2 shows that gold should do well in periods of deflation. Such periods are typically characterised by low interest rates and high financial stress, all of which tend to foster demand for gold.

Further, gold has been more effective in keeping up with global money supply over the past decade than US T-bills, thus better helping investors preserve capital (Chart 3).

Gold Outlook Chart 3: Gold has kept up with money supply growth
Global M2 growth, US 3m T-bill total return, gold price*

Index level
US$/oz
Download
3-month T-Bill (lhs)
Global M2 (lhs)
Gold (rhs)
2000
1975
0
500
1,000
1,500
2,000
2,500
0
400
800
1,200
1,600
2,000
Sources: Bloomberg, ICE Benchmark Administration, Oxford Economics, World Gold Council; Disclaimer

*As of 31 December 2020. Based on global M2 cumulative growth measured in USD, total return index of 3-month US T-bill and LBMA Gold Price PM USD.



EM economic recovery to benefit consumer demand
Market surveys indicate that most economists expect growth to recover in 2021 from its dismal performance during 2020.3 And although global economic growth is likely to remain anaemic relative to its full potential for some time, gold’s more stable price performance since mid-August may foster buying opportunities for consumers.

The economic recovery may particularly realise in countries like China, which suffered heavy losses in early 2020 before the spread of the pandemic was controlled more effectively than in many western countries. Given the positive link between economic growth and Chinese demand, we believe that gold consumption in the region may continue to improve.

Similarly, the Indian gold market appears to be on a stronger footing. Initial data from the Dhanteras festival in November suggest that while jewellery demand was still below average, it had substantially recovered from the lows seen in Q2 of last year.

However, with the global economy operating well below potential and with gold prices at historical high levels, consumer demand may remain subdued in other regions.

Central bank demand not going away
After positive gold demand in H1, central bank demand became more variable in the second half of 2020, oscillating between monthly net purchases and net sales. This was a marked change from the consistent buying seen for many years, driven in part by the decision of the Central Bank of Russia to halt its buying program in April. Nonetheless, central banks are on course to finish 2020 as net purchasers (although well below the record levels of buying seen in both 2018 and 2019). And we don’t expect 2021 to be much different. There are good reasons why central banks continue to favour gold as part of their foreign reserves (see our Central Bank Gold Reserve Survey 2020) which, combined with the low interest rate environment, continue to make gold attractive.

Mine production likely to improve
Recovery in mine production is likely this year after the fall seen so far in 2020. Production interruptions peaked during the second quarter of last year and have since waned.

While there is still uncertainty about how 2021 may evolve, it seems very likely that mines will experience fewer stoppages as the world recovers from the pandemic. This would remove a headwind that companies experienced in 2020 but that is not commonly part of production drivers. Even if potential second waves impact producing countries, major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.

Putting it all together
The performance of gold responds to the interaction of the various sectors of demand and supply, which are, in turn, influenced by the interplay of four key drivers (Focus 1). In this context, we expect that the need for effective hedges and the low-rate environment will keep investment demand well supported, but it may be heavily influenced by the perceptions of risk linked to the speed and robustness of the economic recovery.

Focus 1: Drivers of gold performance
Gold’s behaviour can be explained by four broad sets of drivers:

Economic expansion: periods of growth are very supportive of jewellery, technology and long-term savings
Risk and uncertainty: market downturns often boost investment demand for gold as a safe haven
Opportunity cost: interest rates and relative currency strength influence investor attitudes towards gold
Momentum: capital flows, positioning and price trends can ignite or dampen gold’s performance
Focus 1
At the same time, we anticipate that the economic recovery in some emerging markets, such as China and India, may limit some of the headwinds the gold market experienced in 2020 caused by extremely weak gold consumption.

Using Qaurum, our gold valuation tool (Focus 2), we analysed the performance of gold as implied by five different hypothetical macroeconomic scenarios provided by Oxford Economics. These are: 4

a steady economic recovery (their base-case scenario)
a delayed recovery
a deep financial crisis
a rapid economic upturn
a global second wave.
The results of the analysis suggest that, in general, gold may see a positive, though more subdued, performance in 2021.5 This may be driven primarily by a recovery of consumer demand relative to 2020 as economic conditions improve. In addition, gold’s performance may be boosted further by the prolonged low interest rate environment which would all but remove the opportunity cost of investing in gold.

Alternatively, our valuation model suggests that a global economic relapse from COVID-19 or any other unforeseen risks could result in weak consumer demand, thus creating a headwind for gold’s performance. However, a risk-off environment such the one captured by Oxford Economics’ “deep financial crisis” or “global second wave” may result in strong gold investment demand, which could offset low consumption as it did during 2020. Historically, this behaviour has occurred as investors look for high quality, liquid assets, such as gold, in these risk-off environments.

Focus 2: QaurumSM – Your gateway to understanding gold performance
Qaurum is a web-based quantitative tool that helps investors intuitively understand the drivers of gold performance.

Behind its user-friendly interface, Qaurum is powered by the Gold Valuation Framework (GVF). An academically validated methodology, GVF is based on the principle that the price of gold and its performance can be explained by the interaction of demand and supply.

Accessible from Goldhub.com, the World Gold Council’s data and research site, Qaurum allows investors to assess how gold might react across different economic environments in three easy steps:

select a hypothetical macroeconomic scenario provided by Oxford Economics, a leader in global forecasting and quantitative analysis, or customise your own
generate forecasts of gold demand and supply, and view the impact of key macro drivers
calculate and visualise implied returns for gold.
Based on these, investors can use Qaurum to calculate the hypothetical performance of gold over the next five years as well as long-term 30-year returns implied by GVF and the available (or user-constructed) scenarios.

Additional details on GVF methodology can be found at Goldhub.com.

Download the Gold Market Outlook for 2021
1FT: Fed to tolerate higher inflation in policy shift (August 2020) and The ECB begins its shift to a new inflation goal (October 2020).

2Oxford Economics is a leader in global forecasting and quantitative analysis and a specialist in modelling.

3Bloomberg consensus forecasts are available by using the function ECFC <GO> in its data terminals.

4Visit Qaurum for important disclosure about Oxford Economics’ data, as well as a detailed description of each scenario; the assumptions underlying and data used for each scenario; and its respective hypothetical impact on gold demand, supply and performance.

5This is not an exhaustive list of possible outcomes. These five scenarios reflect key investor concerns captured by Oxford Economics’ Global Risk Survey. Hypothetically, improving market sentiment – for example, due to effective vaccination programmes or the containment of the more transmissible COVID-19 variant – could put downward pressure on gold’s price performance relative to the scenarios currently available on Goldhub.com. Investors can modify the inputs using Qaurum’s customisation function.

Important disclaimers and disclosures[+]

Rate this content:
Collections:
Gold Demand Trends
Gold Investor
Market update
Market primer
Investment case for gold
Investment update
Market focus
Conflict-free gold
Market:
China
Europe
India
Middle East & Turkey
USA
Sector:
Market insights
Supply
Gold production
Recycling
Demand
Jewellery
Investment
Technology
Central banks/official inst.
Related Publications

22 January, 2021
A review of China’s gold market in 2020

11 November, 2020
The relevance of gold as a strategic asset 2020 – Russia edition

10 November, 2020
Gold loans help India weather the COVID-19 storm

29 October, 2020
Gold Demand Trends Q3 2020

2 September, 2020
Gold deposit rates – a guidance paper

30 July, 2020
Gold Demand Trends Q2 2020

16 July, 2020
Online gold market in India

14 July, 2020
Gold mid-year outlook 2020

30 April, 2020
Gold Demand Trends Q1 2020
Goldhub Footer Menu
Goldhub
Data
Portfolio simulator
About Goldhub
Privacy
Contact us
Sitemap
Terms and conditions
©2021 World Gold Council

沪ICP备16026324号

公安备案号31010602004116
营业执照公示营业执照公示Skip to main content
Gold Hub- Gold Price & Gold Market Data and Research

English
Chinese, Simplified

Breadcrumb
Home Gold Outlook 2021
Share this page:Twitter Facebook LinkedIn Google Sina Weibo
Statement regarding COVID-19

X
By using this website you agree to our cookies policy

X
Gold Outlook 2021
14 January, 2021

Sectors: Market insights, Supply, Gold production, Recycling, Demand, Jewellery, Investment, Technology, Central banks/official inst.

Rate this content:
Economic recovery and low interest rates set the tone
The COVID-19 pandemic raised uncertainty by compounding existing risks and creating new ones. But by the end of last year, investors were optimistic that the worst was over.
Looking ahead, we believe that investors will likely see the low interest rate environment as an opportunity to add risk assets in the hope that economic recovery is on the immediate horizon. That said, investors will likely also be navigating potential portfolio risks including:
ballooning budget deficits
inflationary pressures
market corrections amid already high equity valuations.
In our outlook for gold, we believe investment demand will remain well supported while gold consumption should benefit from the nascent economic recovery, especially in emerging markets.
Gold gained from risk, rates and momentum
Gold was one of the best performing major assets of 2020 driven by a combination of:

high risk
low interest rates
positive price momentum – especially during late spring and summer.
Gold also had one of the lowest drawdowns during the year, thus helping investors limit losses and manage volatility risk in their portfolios (Chart 1).

By early August, the LBMA Gold Price PM reached a historical high of US$2,067.15/oz as well as record highs in all other major currencies (Table 1). While the gold price subsequently consolidated below its intra-year high, it remained comfortably above US$1,850/oz for most of Q3 and Q4, finishing the year at US$1,887.60/oz.

Interestingly, gold’s price performance in the second half of the year seemed to be linked more to physical investment demand – whether in the form of gold ETFs or bar and coins – rather than through the more speculative futures market. For example, COMEX net long positioning reached an all-time high of 1,209 tonnes (t) in Q1 but ended the year almost 30% below this level. We believe this was due to the dislocation that COMEX futures experienced in March relative to the spot gold price, making it more expensive to hold futures compared to other choices.

Investors’ preference for physical and physical-linked gold products last year further supports anecdotal evidence that, this time around, gold was used by many as a strategic asset rather than purely as a tactical play.

Gold Outlook Chart 1: Gold outperformed major assets in 2020
Yearly returns and maximum drawdowns of select assets*

Return
Download
Maximum drawdown
Annual return
NASDAQ
Gold
S&P 500
EM stocks
Global Treasuries
US Corporates
US Treasuries
US HY
EAFE stocks
Commodities
Oil
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Sources: Bloomberg, ICE Benchmark Administration, World Gold Council; Disclaimer

*As of 31 December 2020. Returns based on the LBMA Gold Price, Bloomberg Barclays US Treasury Index and Global Treasury Index ex US, Bloomberg Barclays US Corporate and High Yield Indices, MSCI EM Index, Bloomberg Commodity TR Index, MSCI EAFE Index, S&P 500 & NASDAQ Indices, and Bloomberg Oil TR Index. Maximum drawdown computed relative to the 2020 initial value for each respective index.




Gold Outlook Table 1: The gold price is near or above record highs across key currencies
Gold price and annual return in key currencies*

USD
(oz) EUR
(oz) JPY
(g) GBP
(oz) CAD
(oz) CHF
(oz) INR
(10g) RMB
(g) TRY
(oz) RUB
(g) ZAR
(g) AUD
(oz)
2020 return 24.6% 14.3% 18.4% 20.8% 22.4% 13.8% 27.6% 17.0% 55.6% 48.4% 30.9% 13.5%
Year-end price 1,888 1,543 6,266 1,381 2,405 1,669 44,343 396.9 14,030 4,489 891 2,446
Record high 2,067 1,746 7,013 1,573 2,749 1,883 49,803 461.5 16,518 4,907 1,165 2,863
Date† 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Aug 6 Nov 2 Nov 6 Aug 6 Aug
Source: Bloomberg, ICE Benchmark Administration, World Gold Council

*As of 30 December 2020. Based on the LBMA Gold Price PM in local currencies: US dollar (USD), euro (EUR), Japanese yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swiss franc (CHF), Indian rupee (INR), Chinese yuan (RMB), Turkish lira (TRY), Russian rouble (RUB), South African rand (ZAR), and Australian dollar (AUD).
† All dates correspond to 2020.



Gold investment to react to rates and inflation
Global stocks performed particularly well during November and December, with the MSCI All World Index increasing by almost 20% over the period. However, rising COVID-19 cases and a reportedly more infectious new variant of the virus created a renewed sense of caution. Yet, neither this nor the highly volatile US political events during the first week of 2021 have deterred investors from maintaining or expanding their exposure to risk assets.

The S&P 500 price-to-sales ratio is at unprecedented levels (Chart 2) and analysis by Crescat Capital suggests that the 15 factors that make up their S&P 500 valuation model are at – or very near – record highs. Going forward, we believe that the very low level of interest rates worldwide will likely keep stock prices and valuations high. As such, investors may experience strong market swings and significant pullbacks. These could occur, for example, if vaccination programmes take longer to distribute – or are less effective – than expected, given logistical complexities or the high number of mutations reported in some strains.

Gold Outlook Chart 2: Equity market valuations continue to climb
Price-to-sales ratio for the S&P 500*

Price-to-sales
Download
2000
2010
2020
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Sources: Bloomberg, World Gold Council; Disclaimer

*As of 11 January 2021. Based on weekly data.



In addition, many investors are concerned about the potential risks resulting from expanding budget deficits, which, combined with the low interest rate environment and growing money supply, may result in inflationary pressures. This concern is underscored by the fact that central banks, including the US Federal Reserve and European Central Bank, have signalled greater tolerance for inflation to be temporarily above their traditional target bands.1

Gold has historically performed well amid equity market pullbacks as well as high inflation. In years when inflation was higher than 3%, gold’s price increased 15% on average. Notably too, research by Oxford Economics2 shows that gold should do well in periods of deflation. Such periods are typically characterised by low interest rates and high financial stress, all of which tend to foster demand for gold.

Further, gold has been more effective in keeping up with global money supply over the past decade than US T-bills, thus better helping investors preserve capital (Chart 3).

Gold Outlook Chart 3: Gold has kept up with money supply growth
Global M2 growth, US 3m T-bill total return, gold price*

Index level
US$/oz
Download
3-month T-Bill (lhs)
Global M2 (lhs)
Gold (rhs)
2000
1975
0
500
1,000
1,500
2,000
2,500
0
400
800
1,200
1,600
2,000
Sources: Bloomberg, ICE Benchmark Administration, Oxford Economics, World Gold Council; Disclaimer

*As of 31 December 2020. Based on global M2 cumulative growth measured in USD, total return index of 3-month US T-bill and LBMA Gold Price PM USD.



EM economic recovery to benefit consumer demand
Market surveys indicate that most economists expect growth to recover in 2021 from its dismal performance during 2020.3 And although global economic growth is likely to remain anaemic relative to its full potential for some time, gold’s more stable price performance since mid-August may foster buying opportunities for consumers.

The economic recovery may particularly realise in countries like China, which suffered heavy losses in early 2020 before the spread of the pandemic was controlled more effectively than in many western countries. Given the positive link between economic growth and Chinese demand, we believe that gold consumption in the region may continue to improve.

Similarly, the Indian gold market appears to be on a stronger footing. Initial data from the Dhanteras festival in November suggest that while jewellery demand was still below average, it had substantially recovered from the lows seen in Q2 of last year.

However, with the global economy operating well below potential and with gold prices at historical high levels, consumer demand may remain subdued in other regions.

Central bank demand not going away
After positive gold demand in H1, central bank demand became more variable in the second half of 2020, oscillating between monthly net purchases and net sales. This was a marked change from the consistent buying seen for many years, driven in part by the decision of the Central Bank of Russia to halt its buying program in April. Nonetheless, central banks are on course to finish 2020 as net purchasers (although well below the record levels of buying seen in both 2018 and 2019). And we don’t expect 2021 to be much different. There are good reasons why central banks continue to favour gold as part of their foreign reserves (see our Central Bank Gold Reserve Survey 2020) which, combined with the low interest rate environment, continue to make gold attractive.

Mine production likely to improve
Recovery in mine production is likely this year after the fall seen so far in 2020. Production interruptions peaked during the second quarter of last year and have since waned.

While there is still uncertainty about how 2021 may evolve, it seems very likely that mines will experience fewer stoppages as the world recovers from the pandemic. This would remove a headwind that companies experienced in 2020 but that is not commonly part of production drivers. Even if potential second waves impact producing countries, major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.

Putting it all together
The performance of gold responds to the interaction of the various sectors of demand and supply, which are, in turn, influenced by the interplay of four key drivers (Focus 1). In this context, we expect that the need for effective hedges and the low-rate environment will keep investment demand well supported, but it may be heavily influenced by the perceptions of risk linked to the speed and robustness of the economic recovery.

Focus 1: Drivers of gold performance
Gold’s behaviour can be explained by four broad sets of drivers:

Economic expansion: periods of growth are very supportive of jewellery, technology and long-term savings
Risk and uncertainty: market downturns often boost investment demand for gold as a safe haven
Opportunity cost: interest rates and relative currency strength influence investor attitudes towards gold
Momentum: capital flows, positioning and price trends can ignite or dampen gold’s performance
Focus 1
At the same time, we anticipate that the economic recovery in some emerging markets, such as China and India, may limit some of the headwinds the gold market experienced in 2020 caused by extremely weak gold consumption.

Using Qaurum, our gold valuation tool (Focus 2), we analysed the performance of gold as implied by five different hypothetical macroeconomic scenarios provided by Oxford Economics. These are: 4

a steady economic recovery (their base-case scenario)
a delayed recovery
a deep financial crisis
a rapid economic upturn
a global second wave.
The results of the analysis suggest that, in general, gold may see a positive, though more subdued, performance in 2021.5 This may be driven primarily by a recovery of consumer demand relative to 2020 as economic conditions improve. In addition, gold’s performance may be boosted further by the prolonged low interest rate environment which would all but remove the opportunity cost of investing in gold.

Alternatively, our valuation model suggests that a global economic relapse from COVID-19 or any other unforeseen risks could result in weak consumer demand, thus creating a headwind for gold’s performance. However, a risk-off environment such the one captured by Oxford Economics’ “deep financial crisis” or “global second wave” may result in strong gold investment demand, which could offset low consumption as it did during 2020. Historically, this behaviour has occurred as investors look for high quality, liquid assets, such as gold, in these risk-off environments.

Focus 2: QaurumSM – Your gateway to understanding gold performance
Qaurum is a web-based quantitative tool that helps investors intuitively understand the drivers of gold performance.

Behind its user-friendly interface, Qaurum is powered by the Gold Valuation Framework (GVF). An academically validated methodology, GVF is based on the principle that the price of gold and its performance can be explained by the interaction of demand and supply.

Accessible from Goldhub.com, the World Gold Council’s data and research site, Qaurum allows investors to assess how gold might react across different economic environments in three easy steps:

select a hypothetical macroeconomic scenario provided by Oxford Economics, a leader in global forecasting and quantitative analysis, or customise your own
generate forecasts of gold demand and supply, and view the impact of key macro drivers
calculate and visualise implied returns for gold.
Based on these, investors can use Qaurum to calculate the hypothetical performance of gold over the next five years as well as long-term 30-year returns implied by GVF and the available (or user-constructed) scenarios.

Additional details on GVF methodology can be found at Goldhub.com.

Download the Gold Market Outlook for 2021
1FT: Fed to tolerate higher inflation in policy shift (August 2020) and The ECB begins its shift to a new inflation goal (October 2020).

2Oxford Economics is a leader in global forecasting and quantitative analysis and a specialist in modelling.

3Bloomberg consensus forecasts are available by using the function ECFC <GO> in its data terminals.

4Visit Qaurum for important disclosure about Oxford Economics’ data, as well as a detailed description of each scenario; the assumptions underlying and data used for each scenario; and its respective hypothetical impact on gold demand, supply and performance.

5This is not an exhaustive list of possible outcomes. These five scenarios reflect key investor concerns captured by Oxford Economics’ Global Risk Survey. Hypothetically, improving market sentiment – for example, due to effective vaccination programmes or the containment of the more transmissible COVID-19 variant – could put downward pressure on gold’s price performance relative to the scenarios currently available on Goldhub.com. Investors can modify the inputs using Qaurum’s customisation function.


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GOLD: Fire Insurance For Currencies Already Burning To The Ground

December 11, 2020 Egon von Greyerz Founder @ Matterhorn Asset Management & Gold Switzerland

After an extraordinary rally, gold recently entered an anticipated correction phase, which both math and history suggest is about to re-enter a continued trend dramatically upward.

A primary driver for such sustained precious metal strength is an historically undeniable (as well as approaching) paradigm shift toward rising inflation.

When properly understood, the topic of inflation, seemingly academic and even” boring,” in fact becomes rather exciting, as well as predictive, for informed and sophisticated investors.

True Inflation vs. Headline Lies
The great inflation debate continues, with many investors wondering why hyper-inflation has not been the norm given the trillions in fiat currency creation.

Just consider the US money printing in the last 16 years:

And yet despite such torrents of fake money creation, U.S. inflation has annualized at a reported 2% rate with no “Weimar-like” wheel barrels of inflated money in sight.

In short, many are asking: Where’s the inflation?

Toward this end, it is critical to first distinguish true vs. popular notions of inflation.

From the Austrian School to Milton Friedman, the true definition of inflation has always been understood (and measured) by money supply.

As the supply increases, inflation follows.

The popular/media-driven definition, however, uses consumer prices as measured by such broken scales as the CPI to measure inflation.

A Policy of Dishonesty

Unfortunately, the CPI scale, which has undergone over 20 alterations since 1980, is an openly comical and deliberately inaccurate inflation measure.

It’s akin to a bathroom scale that measures your body weight yet magically omits calories attributed to chocolate, beer, pasta or pizza.

That is, the CPI scale magically under-weights (discounts) medical, housing, energy, education and other key costs—all of which have openly skyrocketed while the CPI rates have “mysteriously” fallen to the floor of history.

This is no accident, as treasury departments and global central banks fully understand that if inflation, as measured by such scales as the CPI, were accurately reported using 1980-based metrics, we’d already be looking at greater than 10% inflation rates today.

If such truths were honestly confessed, then inflation-adjusted/real return on sovereign bonds would be so openly (and shamefully) negative (i.e. > -8%) that no one would buy government IOU’s.

Of course, that’s a big problem in a now broken world where government IOU’s (i.e. global debt to the tune of 280 trillion) is all that keeps our otherwise Frankenstein economies walking—arms outstretched.

Thus, rather than confess true inflation, the fiction writers at places like the Fed or the Bureau of Labor Statistics resort to a trick which all desperate policy makers inevitably embrace when their experiments fail: They fudge the numbers.

Stated otherwise: They lie.

But then again, and as empirically shown elsewhere, the highest offices are not necessarily filled by the highest minds.

Dishonesty at the policy level is nothing new.

Since Nixon welched on the Gold Standard in 1971, policy makers have been acting like college party boys without a chaperone.

They can borrow and spend with money created by a mouse click for the simple reason that it is backed, by well…nothing.

This fully explains why the US public debt to GDP ratio rose from 33% in 1971 to 106% by 2019.

By the end of this year, thanks to unlimited QE (money printing), that ratio will hit 120%.

By the true definition of inflation (above), such desperate money creation can only mean one thing: More inflation.

And More, Well… Lies
Remember, of course, that Nixon had said the dollar’s de-coupling from gold was only a “temporary measure.”

That was 50 years ago and the “temporary” continues… DC and Wall Street continue to party without a golden chaperone.

In 2009, as the Great Financial Crisis (caused by great debt) raged, Fed Chairman Bernanke equally assured the world that such money creation was a purely “temporary emergency measure.”

This too was purely untrue, as over a decade later, Bernanke’s “temporary” and “emergency” policy has since become a policy norm.

Hence the market’s reaction: Party on.

Today, the Fed and the central banks of the world do nothing but print fiat currencies to pay for unpayable deficits and give liquidity to an artificial and historically unprecedented securities bubble.

Enter the COVID Accelerator
COVID and the misguided policy reactions thereto, have only accelerated such insane debt levels and the creation of fake money to pay for it—all of which points to more inflation—namely, the kind that kills currencies and sends gold prices significantly upward.

The vast majority of investors, of course, pay no attention to these creeping inflationary forces and superficially supported risk assets, as they see only one thing: Rising markets riding a wave of fake liquidity over hidden rocks of unpayable debts.

But as we’ve also warned, the vast majority of investors are simply wrong.

But Where’s the Inflation?
That’s still the trillion-dollar question.

As of this writing, inflation in prices has not hit the Main Street (yet bogus) CPI scales, but has gone directly to Wall Street, as the bulk of the fake money printed since the GFC of 2008 went from the Fed to the primary dealer banks, and then to the publicly-traded corporations they serve.

In short, “price inflation” went to places like the S&P, not the deliberately false CPI.

This explains why the DOW and S&P can break new highs as the real economy endures record lows.

Such artificial risk-asset support in a time of open economic decline is disgraceful—but that’s what central banks do: Support banks and markets, not economies and real-world issues.

iCentral bank experimentation and market “accommodation” is a direct cause of the growing wealth disparity seen in the U.S. and around the world, and hence explains the populist movements which made the headlines in 2020.

Ironically, the vast majority of those angry crowds, like the vast majority of happy investors, can’t even point to the central bank source of both their woes and false comforts.

This is due to a fundamental ignorance (or ignoring) of basic economic forces.

Econ 101, History 101, and Basic Math
The core lessons of economics, math and history repeatedly confirm that diluting currency power via fake money policies never leads to economic growth, just temporary (and fatally dangerous) asset bubbles.

That is, for every dollar of printed growth, it takes four dollars of debt. Hardly a good trade.

The U.S. (like the other major economies of the world) are effectively running uphill in roller skates using gobs of debt to essentially churn in place, and then paying for that debt with fiat money.

Does fiat currency creation still seem like a wise, long-term plan to you?

For this, investors can thank “honest brokers” like gold-welching Nixon for taking US budget deficits from 2.8 billion in 1970, to $1 trillion in fiscal year 2018-19, and now $3.3 trillion for 2020.

In turn, investors can also thank print-happy central bankers like Greenspan, Bernanke, Yellen and Powell for fattening total U.S. credit market debt from $1.6 trillion in 1970 to $80 trillion today.

Folks, debt like this can never be repaid. Never.

So, what’s ahead?

The Great Paradigm Shift: Inflationism

Now, let’s get back to that elusive inflation question.

Just like families with more debt than income, the best option is to find ways to grow your income.

But as we’ve seen above, that kind of growth just isn’t there for a global economy whose debt to GDP ratio is now well past 3:1.

The kind of economic growth needed to squelch such debt levels requires a near-perfect alignment of debt-free consumer strength, rapid growth in working age populations, massive productivity booms in manufacturing and free trade as well as a central bank providing discipline rather than punch bowls to the markets—none of which is likely or possible today.

Full stop.

The next (and desperate) option, however, is to make one’s currency weaker, inflate the same, and pay yesterday’s debt with tomorrow’s inflated/printed currency, a policy now openly embraced by the Dr. Frankensteins at the Eccles Building in D.C.

Deliberate Inflation Ahead—From Boom to “Uh-Oh”

This, I’d argue, is far more possible and far more likely, namely to finance deficits with inflation-diluted currencies, a policy aptly named “inflationism.”

Thus, despite years of deflationary headlines and yield-curve controls by experimental central banks, inflationism is slowly (and I mean SLOWLY) becoming the new paradigm right under our noses.

As debt levels soar, fostering massive pricing bubbles in stocks, bonds, commodities and real estate, we are seeing the classic pattern of boom leading toward “uh-oh” and, in turn, a final shift toward rapidly rising inflation and hence rapidly declining currency valuations.

Gold’s Moment of “Ahhhh.”

In the current paradigm shift, gold will rise not because gold only rises in inflationary periods (after all, gold recently hit new highs in an openly deflationary global setting).

Instead, gold will rise simply because currency purchasing power will tank (and is already tanking) as inflationism progresses from a slow trot, to a cantor and then to a full gallop.

That is, gold will rise because currencies (diluted daily via money printing) are falling by the second. This is not an opinion, but a mathematical certainty.

Like Picket’s charge at Gettysburg, currencies are marching straight into a deadly (i.e. inflationary) cannon barrage.

One look at the recent rise in gold prices, for example…

…is literally nothing more than taking a chart of the dollar or euro’s purchasing power and turning it upside down, like this:

In short, gold has nowhere to go but up simply because currencies, in an inflationary paradigm shift, ultimately have nowhere to go but down.

Seeing Clearly
Informed investors see this.

They are not nervously day-trading in and out of gold price fluctuations subject to extreme, near-term volatility and “spoofing” in the paper-gold trade (for which banks like JP Morgan and Scotiabank are paying massive, $100M+ penalties).

Nope.

Informed investors are precisely that—investors, not traders.

They buy gold and hold, not because they watch price swings, but because they understand currency forces.

It’s that simple.

Informed investors hold gold because the dollars and euros in their pockets, banks and markets are getting weaker by the second, regardless of the amounts listed on their ledgers, statements and portfolios.

Or stated even more simply, gold is their fire insurance for a currency that is already burning to the ground.

Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45

Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 70 countries.
GoldSwitzerland.com

How Malaysia’s State Funds Work

Former PNB Chairman & CEO Exposes How Malaysia’s State Funds Work | TRP

Former Permodalan Nasional Berhad (PNB) President & Group Chief Executive Officer Jalil Rasheed has given the low-down on Malaysia’s state funds and how each of them work. In a series a Tweets recently, he explained about the three funds in the country – the catalytic development fund (Khazanah), the pension fund (KWSP) and unit trust (PNB).

Catalytic development funds

Catalytic development funds, he said, are designed to align themselves with the country’s policies, which is why in Khazanah the Prime Minister is the Chairman. Khazanah received a seed injection upon inception in early 90s; and since then had to raise money from raising debt and selling down stake.

However, unlike other sovereign wealth funds, he said Khazanah does not receive cash injection from the government. Hence it’s vital that Khazanah continues selling assets (non strategic assets) in order to make new investments and continue paying the government dividends, that has been agreed upon.

In Singapore, Temasik Holdings is a similar entity but he said that it has a more diversified asset class. Jalil added that it holds some of Singapore’s key strategic national assets like Khazanah.

Pension Funds

Next, he explained about pension funds, which has two systems; Defined contribution (EPF) – both employee & employer contribute. Defined benefit (KWAP) – the employer pays for the pension. The investment challenge within the pension fund system is the asset & liability matching where the money coming in monthly needs to be deployed to be invested in a manner that would be enough to sustain one’s retirement (asset allocation).

Compared to Singapore’s Central Provident Fund (CPF), EPF doesn’t have a contribution limit while CPF caps it at S$5,000 per month in total from the employer & employee. This was done to avoid a situation where the fund size gets unequally disproportionate. The aim was that CPF money is to help in basic retirement, buy HDB but not really to go beyond that.

Unit Trust

Lastly, Jalil talked about Unit trust (PNB), which works like any other unit trust fund but is huge in size. He added that unit trust can be in many forms, dividend paying or capital appreciation. The common thing about the three examples above is that they may overlap in certain investments; for example investing in same sectors, stocks, countries, but how the funds are managed is completely different because each has its own payment obligation, different ways of receiving money, and importantly different mandates (and end objective).

Commenting on other sovereign funds that Singapore has, he said that the republic also has the GIC, which is formerly known as the Government of Singapore Investment Corporation. It’s responsible for managing money given by the Singapore government through various agencies. This also reduces the need to duplicate investment teams across each investment entity. GIC focuses on managing money, across different asset classes, with one ultimate client, the government.

To summarise, catalytic development funds put money into things the government wants to grow, pension funds try to grow your pension so you can live off it later, and unit trust funds are just huge.

Prinsip Dasar Muamalah dalam Islam

Penyusun : Sumardi December 12, 2017

Secara umun pengertian Fiqih muamalah adalah hukum-hukum yang berkaitan dengan tindakan manusia dalam persoalan keduniaan, misalnya dalam persoalan jual beli, hutang piutang, kerja sama dagang, perserikatan, kerja sama dalam penggarapan tanah, dan sewa menyewa.

Shahhathah (Al-Ustaz Universitas Al-Azhar Cairo) dalam buku Al-Iltizam bi Dhawabith asy-Syar’iyah fil Muamalat Maliyah (2002) mengatakan, “Fiqh muamalah ekonomi, menduduki posisi yang sangat penting dalam Islam. Tidak ada manusia yang tidak terlibat dalam aktivitas muamalah, karena itu hukum mempelajarinya wajib ‘ain (fardhu) bagi setiap muslim.

Husein Shahhatah, selanjutnya menulis, “Dalam bidang muamalah maliyah ini, seorang muslim berkewajiban memahami bagaimana ia bermuamalah sebagai kepatuhan kepada syari’ah Allah. Jika ia tidak memahami muamalah maliyah ini, maka ia akan terperosok kepada sesuatu yang diharamkan atau syubhat, tanpa ia sadari. Seorang Muslim yang bertaqwa dan takut kepada Allah swt, Harus berupaya keras menjadikan muamalahnya sebagai amal shaleh dan ikhlas untuk Allah semata”

Memahami/mengetahui hukum muamalah maliyah wajib bagi setiap muslim, namun untuk menjadi expert (ahli) dalam bidang ini hukumnya fardhu kifayah.

Oleh karena itu, Khalifah Umar bin Khattab berkeliling pasar dan berkata: “Tidak boleh berjual-beli di pasar kita, kecuali orang yang benar-benar telah mengerti fiqh (muamalah) dalam agama Islam” (H.R.Tarmizi).

Sehubungan dengan itulah Dr.Abdul Sattar menyimpulkan Muamalat adalah inti terdalam dari tujuan agama Islam untuk mewujudkan kemaslahatan manusia. Menurut Wahbah Zuhaili, hukum muamalah itu terdiri dari hukum keluarga, hukum kebendaan, hukum acara, perundang-undangan, hukum internasional, hukum ekonomi dan keuangan.

4 Prinsip Muamalah dalam Islam Pada dasarnya segala bentuk muamalat adalah mubah, kecuali yang ditentukan oleh al-qur’an dan sunnah rasul. Bahwa hukum islam memberi kesempatan luas perkembangan bentuk dan macam muamalat baru sesuai dengan perkembangan kebutuhan hidup masyarakat.

Muamalat dilakukan atas dasar sukarela , tanpa mengandung unsur paksaan. Agar kebebasan kehendak pihak-pihak bersangkutan selalu diperhatikan.

Muamalat dilakukan atas dasar pertimbangan mendatangkan manfaat dan menghindari madharat dalam hidup masyarakat. Bahwa sesuatu bentuk muamalat dilakukan ats dasar pertimbangan mendatangkan manfaat dan menghindari madharat dalam hidup masyarakat.

Muamalat dilaksanakan dengan memelihara nilai keadilan, menghindari unsur-unsur penganiayaan, unsur-unsur pengambilan kesempatan dalam kesempitan. Bahwa segala bentuk muamalat yang mengundang unsur penindasan tidak dibenarkan.

5 Batasan Muamalah dalam Islam Setelah mengenal secara umum apa saja yang dibahas dalam fiqh muamalat, ada prinsip dasar yang harus dipahami dalam berinteraksi.

Ada 5 hal yang perlu diingat sebagai landasan tiap kali seorang muslim akan berinteraksi. Kelima hal ini menjadi batasan secara umum bahwa transaksi yang dilakukan sah atau tidak, lebih dikenal dengan singkatan MAGHRIB, yaitu Maisir, Gharar, Haram, Riba, dan Bathil.

1. Maisir Menurut bahasa maisir berarti gampang/mudah. Menurut istilah maisir berarti memperoleh keuntungan tanpa harus bekerja keras. Maisir sering dikenal dengan perjudian karena dalam praktik perjudian seseorang dapat memperoleh keuntungan dengan cara mudah. Dalam perjudian, seseorang dalam kondisi bisa untung atau bisa rugi. Padahal islam mengajarkan tentang usaha dan kerja keras. Larangan terhadap maisir / judi sendiri sudah jelas ada dalam AlQur’an (2:219 dan 5:90)

2. Gharar Menurut bahasa gharar berarti pertaruhan. Terdapat juga mereka yang menyatakan bahawa gharar bermaksud syak atau keraguan.[3] Setiap transaksi yang masih belum jelas barangnya atau tidak berada dalam kuasanya alias di luar jangkauan termasuk jual beli gharar. Boleh dikatakan bahwa konsep gharar berkisar kepada makna ketidaktentuan dan ketidakjelasan sesuatu transaksi yang dilaksanakan, secara umum dapat dipahami sebagai berikut : sesuatu barangan yang itu wujud atau tidak; – barangan yang ditransaksikan itu mampu diserahkan atau tidak; – transaksi itu dilaksanakan secara yang tidak jelas atau akad dan kontraknya tidak jelas, baik dari waktu bayarnya, cara bayarnya, dan lain-lain. Misalnya membeli burung di udara atau ikan dalam air atau membeli ternak yang masih dalam kandungan induknya termasuk dalam transaksi yang bersifat gharar. Atau kegiatan para spekulan jual beli valas.

3. Haram Ketika objek yang diperjualbelikan ini adalah haram, maka transaksi nya mnejadi tidak sah. Misalnya jual beli khamr, dan lain-lain.

4. Riba Pelarangan riba telah dinyatakan dalam beberapa ayat Al Quran. Ayat-ayat mengenai pelarangan riba diturunkan secara bertahap. Tahapan-tahapan turunnya ayat dimulai dari peringatan secara halus hingga peringatan secara keras. Tahapan turunnya ayat mengenai riba dijelaskan sebagai berikut :

Pertama, menolak anggapan bahwa riba tidak menambah harta justru mengurangi harta. Sesungguhnya zakatlah yang menambah harta. Seperti yang dijelaskan dalam QS. Ar Rum : 39 . “Dan sesuatu riba (tambahan) yang kamu berikan agar dia bertambah pada harta manusia, maka riba itu tidak menambah pada sisi Allah. Dan apa yang kamu berikan berupa zakat yang kamu maksudkan untuk mencapai keridaan Allah, maka (yang berbuat demikian) itulah orang-orang yang melipat gandakan (pahalanya)”

Kedua, riba digambarkan sebagai suatu yang buruk dan balasan yang keras kepada orang Yahudi yang memakan riba. Allah berfiman dalam QS. An Nisa : 160-161 . “Maka disebabkan kelaliman orang-orang Yahudi, Kami haramkan atas mereka (memakan makanan) yang baik-baik (yang dahulunya) dihalalkan bagi mereka, dan karena mereka banyak menghalangi (manusia) dari jalan Allah, dan disebabkan mereka memakan riba, padahal sesungguhnya mereka telah dilarang daripadanya, dan karena mereka memakan harta orang dengan jalan yang batil. Kami telah menyediakan untuk orang-orang yang kafir di antara mereka itu siksa yang pedih.”

Ketiga, riba diharamkan dengan dikaitkan kepada suatu tambahan yang berlipat ganda. Allah menunjukkan karakter dari riba dan keuntungan menjauhi riba seperti yang tertuang dalam QS. Ali Imran : 130. “Hai orang-orang yang beriman, janganlah kamu memakan riba dengan berlipat ganda dan bertakwalah kamu kepada Allah supaya kamu mendapat keberuntungan.”

Keempat, merupakan tahapan yang menunjukkan betapa kerasnya Allah mengharamkan riba. QS. Al Baqarah : 278-279 berikut ini menjelaskan konsep final tentang riba dan konsekuensi bagi siapa yang memakan riba. “Hai orang-orang yang beriman, bertakwalah kepada Allah dan tinggalkan sisa riba (yang belum dipungut) jika kamu orang-orang yang beriman. Maka jika kamu tidak mengerjakan (meninggalkan sisa riba), maka ketahuilah, bahwa Allah dan Rasul-Nya akan memerangimu. Dan jika kamu bertobat (dari pengambilan riba), maka bagimu pokok hartamu; kamu tidak menganiaya dan tidak (pula) dianiaya.”

5. Bathil Dalam melakukan transaksi, prinsip yang harus dijunjung adalah tidak ada kedzhaliman yang dirasa pihak-pihak yang terlibat. Semuanya harus sama-sama rela dan adil sesuai takarannya. Maka, dari sisi ini transaksi yang terjadi akan merekatkan ukhuwah pihak-pihak yang terlibat dan diharap agar bisa tercipta hubungan yang selalu baik. Kecurangan, ketidakjujuran, menutupi cacat barang, mengurangi timbangan tidak dibenarkan. Atau hal-hal kecil seperti menggunakan barang tanpa izin, meminjam dan tidak bertanggungjawab atas kerusakan harus sangat diperhatikan dalam bermuamalat.

Current monetary system the cause of our hardships?

Is there something wrong with the current monetary system? Well, a group of academics and social activists are convinced that something is terribly wrong enough to prompt them to run a seminar on the issue.

Last Saturday, a seminar entitled “Current Monetary System is the Cause of our Hardships, Unending Rises in Prices, and Unemployed Youths and Graduates” attempts to bring some attention to their argument.


The half-day seminar in Shah Alam was organised by the Movement for Monetary Justice Malaysia (MMJ) and Malaysian Consultative Council of Islamic Organisation.

When discussing the hardship faced by the people, the organisers argued that it had never been directed towards the monetary system.

The seminar intended to discuss the ills of the current monetary system as well as to “unveil one by one, the evil of the system.

“Money is a very important tool in life today. It becomes the intermediary for the exchange of goods and services in our society. It is a necessity but at the same time, if the wrong monetary system is practised, it can be a very heavy burden on people’s lives, as well as a burden on the country and religion,” according to a document promoting the seminar.

One of the key speakers was MMJ chairman Prof Datuk Dr Ahamed Kameel Mydin Meera, a former economics professor at the International Islamic University Malaysia. He is also author of three books related to the seminar topic: Islamic Gold Dinar, The Theft of Nations and Real Money.
The other speakers included MMJ deputy chairman and former Islamic banker Muhammad Zahid Abdul Aziz, Universiti Malaya economics Prof Dr Mohd Nazari Ismail, former CEO of an Islamic bank Datuk Abdul Manap Abdul Wahab and Shariah expert Noor Derus.

MMJ describes itself as a group of academicians, ex-bankers, scholars, professionals, activists, students and ordinary people determined to reform the monetary system to ease its intense burden on the rakyat.

He Was Selling Pens on the Street to Survive—Then a Man Snapped a Photo of His Daughter…

Abdul Halim al-Attar is a Syrian refugee who was selling pens in the streets of Beirut in order to make a living for his children

But once a photo of Abdul selling his pens while holding his daughter hit the Internet, it went big-time viral. The picture featured his daughter Reem sleeping on his shoulder as he tried to market his pens to passerbys in the scorching heat. It touched people’s hearts across the globe.

The heartbreaking picture of his little one slumbering on her struggling father was almost too much for people to bear.

Now, thanks to an online crowdfunding campaign set up for him, Abdul has amassed a fund of $191,000. It was an online journalist and web developer in Norway named Gissur Simonarso who saw this man’s plight and decided he wanted to help.

He had no idea that his simple campaign would bring in nearly $200,000.

And Abdul is certainly putting it to good use. The 33-year-old father has opened 3 businesses with the new financial blessing. He started with a bakery two months ago, and later he opened a kebab shop and a small restaurant.

He went from pen seller on the street to quite the business entrepreneur, and he now employs 16 other Syrian refugees. There are approximately 1.2 million refugees registered in Lebanon, and it’s been extremely difficult for them to find jobs, so his 16 employees feel very lucky.

“Not only did my life change, but also the lives of my children and the lives of people in Syria whom I helped,” he said. He gave away about $25,000 to friends and family members in Syria.

On top of the new business ventures, Abdul has been able to move his children into a two-bedroom apartment where his 4-year-old daughter Reem and his 9-year-old son Abdullelah can now enjoy a more comfortable life.

Reem gets to play with her new plastic kitchen set and swing, and Abdullelah is back in school after being out for 3 years.

And Abdul has a newfound respect in the community as well. “They just greet me better now when they see me. They respect me more,” he said smiling.

One act of kindness by one man ignited a viral act of kindness from thousands of strangers pouring in their contributions.

What a wonderful reminder that no act for good is too small. After all, you never know when it could change someone’s entire life.

http://www.faithit.com/he-was-selling-pens-on-the-street-to-survive-then-a-man-snapped-a-photo-of-his-daughter-world-changers/#.VmOfHlsG9j5.facebook

Don’t Dismiss The EU Investigation Into Alleged Gold And Silver Price Fixing | Gold Eagle

Goldbugs are bemused by reports that the European Union competition watchdog is investigating alleged ‘anti-competitive behavior’ by participants in the precious metals market. But anybody who remembers how the EU broke up the cement cartel a couple of decades ago will know that this is a watchdog that has very powerful teeth. It’s fines can bankrupt even very large companies or banks.

Prior evidence

True the goldbugs have watched and waited in the past when various investigations into alleged precious metal price fixing have been launched in the US, UK and Germany. These investigations have quietly concluded that nothing was wrong, despite some very convincing evidence from market watchers and industry experts.

The general view in the gold community is that the central banks themselves manipulate the gold price to help dampen inflation expectations. And the central banks are above the law in such matters.

However, they may have met their match in the EU competition watchdog. According to the Treaty of Rome and its later additions, EU law is the supreme authority, and even central banks are subservient to its law.

The European Union is particularly strong on maintaining a level playing field in terms of business competition and market pricing. There was a time big cement firms thought they were above EU law, until one day investigators turned up first thing in the morning to seize documents and take away computers.

After rather a short period of time the huge fines were made, hundreds of millions of dollars that really hurt profits. The cement cartel collapsed and prices fell, and so did their share prices.

EU calling

Could the bullion banks be the next to get that knock on the door early one morning? The EU investigators could do worse than start by reading back pages of the zerohedge.com website which regularly documents the false trades used to depress gold prices that are so blatant a blind man in a coal cellar could see them.

Why are these trades initiated? Who does it? On whose orders are they operating? What is the benefit to them of these blatant price manipulations?

These are a few of the awkward questions the EU competition guys might like to put to those few players who count in the precious metals market. Could this be another cement cartel for them to bust? Why not? It is just as obvious

 

Source: Don’t Dismiss The EU Investigation Into Alleged Gold And Silver Price Fixing | Gold Eagle

How To Break Free From Materialism In 3 Distinct Ways

Our society is currently enslaved by a 9-5 alarm clock lifestyle. Pieces of paper control our every move. From the moment we are born, we are indoctrinated by our parents, our school system, the media to think that success is defined by material gain.

Happiness, contentment and relationships are secondary to income. Because our culture values material success the most, we currently live in a world that is enslaved to the dollar.

Slavery is when your work is no longer an opportunity for economic advancement but is instead an act of mere self-preservation.

Most people are owned by their material pursuits, and spend their entire lives trying to pay off debt they earned from purchases and bills that have piled up over the years.

If you are reading this, there is a good chance you work a 9-5 job and are sick of it. Maybe your are psychologically trapped in a world of numbers and material concerns and want to break free from mental slavery.

Whatever your specific situation is, the truth is that the vast majority of people who read this are fed up with debt, long work hours and being programmed by advertisements to buy things they don’t need.

The good news is, just because you live in a consumerist society doesn’t mean you have to live as a consumerist.

Here are 3 ways you can break free from materialism and reclaim your soul:

  1.  Leave The Rat Race
  • Who wrote the rule that said we have to work 9-5 Monday through Friday?
  • Who wrote the rule that we have to graduate school and hop right into a full time job?
  • Who wrote the rule that said we have spent 40 years of our life working full time and can only retire when we are 60 or 70?

You don’t have to do what society thinks you should do, and you don’t have to do what your parents think you should do. If you are sick of the rat race, then leave it.

Nobody is putting a gun to your head forcing you to work 40 hours a week at a job you don’t like. But the bills need to be paid, right? That brings us to the next point.

2)  Don’t Live To Impress

The only reason we need to work 40 hours a week is because we buy things we don’t need with money we don’t have to impress people around us. Because we are taught that success and value is defined in material terms, we figure we need to accumulate as much possessions as we can.

If you cut your expenses in half and lived for yourself, you would only have to work half of the hours you work now.

  • Do you really need to finance that new car? Or should you buy a used one?
  • Do you really need to live in a 2000 square foot house with all new appliances?
  • Do you really need that new television?
  • Or those designer clothes?
  • The newest iPhone?
  • That expensive laptop?

A lot of the times, we enslave ourselves because our egos want to be seen as successful in the eyes of other people. We define our sense of worth and value on how we measure up to other people.

In the same way kids on the playground used to say “My dad can beat up your dad”, adults say “My houses is nicer than your house.”

As you can see, some people don’t grow out of this playground mentality. And because of this, many people live paycheck to paycheck. This pursuit of egoic self-glorification is ultimately what enslaves us to the dollar and steals our happiness. This brings us to the next point.

3)  Transcend The Material

Don’t define yourself in relation to other people, the materials you own, or the lifestyle you live. Define yourself in relation to your relationship with yourself and with God.

  • Are you spiritually fulfilled?
  • Do you feel whole and peaceful inside?
  • If not, how can this be called success?

Once you experience the part of yourself that is deeper than the material, the material world is a joke to you. Once you tap into that infinite space of grace and peace during meditation or communion with nature, there is no longer a need to carry on with the endless pursuit of material gain.

How many Buddhist monks do you think are in debt up to their eyeballs?

The same culture that tells us success is measured by material success is also the most unhappy, overweight, stressed out and in debt culture in the world. Suicide is currently the 10th leading cause of death in America. I suspect a good percentage of depression comes from people being bright up in a dead-end society that is hollow, boring, consumer driven, spiritually void and enslaved to a piece of paper.

You don’t have to be a slave to capitalism, materialism, or consumerism. Be brave. Ditch the rat race, live within your means, know when it’s time to scale down and start practicing yoga or meditation, and you will open yourself up to a whole new world of possibilities you didn’t even know was there.