The World Gold Council (WGC) sees a decent future for gold, given the backdrop of current global geopolitical tensions and rising debt levels of some of the developed countries like the US, which is expected to keep the US dollar perky and not allowing it to appreciate, said the council’s Chief Executive Officer David Tait.
These factors and the WGC’s efforts to lower the barrier to entry — introduction of digital gold — is expected to support the prices of gold in future, Tait told /indidna.
The pressure on the dollar will continue and the US Fed will manage “necessary decline in employment rate” to squeeze inflation out of the system, Tait added.
He sees the yellow metal hitting an all-time high soon. “Probably the most important thing out there is the level of debt in most countries. If we start seeing decline in economic activity, it is very likely that this debt burden would worry enough people that gold would be the asset of choice to go to,” said Tait.
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He highlighted that constant inflation and issuance of debt devalues fiat currencies over time. “If we are able to digitalise gold and make it easy to invest in as other fiat currencies or other asset classes, you are going to see huge influx into gold. We are in that process now and by next year we should complete it,” Tait added.
Tait also said that he expects global inflation to come down “quite significantly”, going to the latter part of the current year, on the back of continued monetary tightening by central banks to “drive inflation expectation out of our heads”.
“We don’t know what will be the outcome in Ukraine. Personally, Iam rather nervous about geopolitical and economic backdrop more than ever I have been in my life. However in the context of gold, I don’t see anything drawing the rug underneath it,” he said.
Asked if the current time was the right one for the average person on the street to invest in gold, Tait said “Yes. You have to be invested even at these levels”.
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WOOING MILLENNIALS
In India, WGC will take marketing efforts to see to it that gold is attractive to a younger audience and ensure there is a pipeline of people coming into the asset class at both jewellery level, but also most importantly at an investment level as well because this is largely untapped market, he said.
Tait wants young India to look at having 5-10 per cent of their portfolio invested in gold, noting that this “balanced portfolio” approach would give diversification and secure their future with solid returns.
“The most important thing I think for younger generation and who are tech savvy and have the ability to invest in gold electronically, in whatever form, is to make them understand the maths behind having gold as part of their managed portfolio.
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Many people have portfolios comprising bonds and equities. We will try to make a case to the younger people, that having gold as 5-10 per cent of your portfolio is necessary given the diversification, risk mitigation and growth prospect benefits over the future of their career or lifetime. So, if we can get the younger generation to understand the benefits of holding gold, that is a massive dynamic change for the future,” said Tait.
Tait highlighted that out of the $200 trillion of assets out there, not just in India but around the world, less than 1 percent is invested in alternative asset classes, let alone gold.
“If we are able to change that dynamic to three to four to five percent, you can imagine what that would do to hold demand,” he said.
WGC sees India’s demand for gold range between 700-750 tonnes this year. Asked about the status of Self Regulatory Organisation (SRO) for gold industry in India, Tait said he was hopeful it would be ready and go live in first half next year.
