Gold’s role as a hedge against inflation and uncertainty is well established. In recent years, investor interest in gold has increased significantly, particularly since the 2008 Global Financial Crisis. While the macroeconomic outlook continues to be uncertain, we expect investor demand for gold to remain strong.
We Provide Europe's Leading Range of Gold ETCs
What is the investment case for gold?
Here is a look at some of the unique attributes and potential benefits of investing in gold.
For more details, access our gold investment case.
What influences the gold price?
Here at WisdomTree we have determined 4 key factors that influence the gold price.
- Gold typically performs well during periods of uncertainty. If investors have concerns over systemic risks, political turmoil, or stock market volatility, they will often turn to gold, and this can push its price up.
- Historically gold has been a hedge against rising prices, and therefore tends to respond positively to inflation. In a disinflationary environment, gold sometimes declines in value.
- Gold is highly influenced by monetary factors and particularly the strength of the US Dollar. When the US Dollar (USD) increases relative to other currencies, the price of gold in USD tends to fall and vice versa.
- WisdomTree has found an inverse relationship between nominal yields on 10-year US treasuries and the price of gold.
WisdomTree has developed a model that incorporates these factors to predict potential changes in the gold price across a range of scenarios.
What our gold model predicts
Source: Bloomberg, WisdomTree. Forecasts are not an indicator of future performance and any investments are subject to risks and uncertainties. *Based on consensus forecasts taken from Bloomberg in December 2019.
There are several additional factors that are commonly considered to impact the gold price such as jewellery demand, investor bullion demand, central bank bullion demand, technology, equity market movements, financial market volatility and growth in central bank balance sheets. However, WisdomTree has found when conditioning for the four key factors listed above an these other variables do not add any further explanation to the behaviour of gold prices historically. The benefit is that our framework for valuing gold can be kept simple.
Why invest in gold using ETCs
Although there are numerous ways to invest in gold, ETCs possess a number of advantages over several of these other methods.
|Gold ETCs||Physical Gold Bullion||Gold Mining Shares||Gold Futures|
|Listed on exchange and traded like shares during market hours||Requires safe delivery, secure storage and insurance||Shares bought & sold on exchange||Inaccessible to a wide variety of investors and requires contract ‘rolling’ to avoid taking physical delivery of gold|
|Tracks movements in the gold price||Tracks mining companies, which can be affected by several factors not related to gold price||However you don't obtain exposure to the spot price due to the effect of roll costs|
|Simple and transparent fee structure||Although smalls bars and coins are bought at a premium and there are additional costs for storage and insurance of bullion||Typical costs are those associated with holding shares though certain exceptions apply||Can be cost-effective for those with the necessary infrastructure|
Our gold ETC range
Synthetic gold ETCs do not hold the underlying assets (gold) that the ETCs are designed to track. Instead the issuer enters into a swap agreement with a counterparty that contracts to provide the return of the underlying gold.
Short & leveraged gold ETCs provide short and leveraged exposures to gold futures. For example a 2x Daily Long Gold ETC is designed to reflect 200% of the daily percentage change in the Index level.
In 2012, the London Bullion Market Association (LBMA) implemented its Responsible Gold Guidance. This is a mandatory framework for all Good Delivery listed refiners wishing to sell into the London Bullion Market designed to combat money laundering, terrorist financing and human rights abuses globally.
WisdomTree are working closely with our custodians to maximise our physical gold ETC's exposure to gold that is sourced in compliance with the LBMA's Responsible Gold Guidance, which confirms that only gold mined from 2012 onwards can be considered responsibly sourced. Our custodians achieve this through the standard creation-redemption process and a periodic de-allocation swap process, where they are switching out any bars with a date stamp of pre-2012 and replacing these with bars dated 2012 or later.