QNB Highlights Three Factors Boosting Gold's Appeal in Investment Portfolios

According to a recent economic report by Qatari National Bank (QNB), gold is reaffirming its status as a prime alternative investment, serving as a hedge against inflation and geopolitical unrest. This positions it as an attractive option for investors seeking stability and risk mitigation.

QNB's weekly report highlighted gold's historical role as a value reserve and safe haven, contributing to its enduring appeal. Gold's foundational role in the global monetary system during the Gold Standard era and the Bretton Woods system underlined its significance in ensuring currency convertibility and reserve currency status.

Despite gold's non-income-generating nature and the costs associated with extraction, investors, including individuals, sovereign states, and corporations, continue to value it highly. Gold's enduring attractiveness is attributed to its proven capacity to safeguard wealth during significant economic crises, such as the 2008-2009 financial crises and the COVID-19 pandemic.

After a substantial decline from its peak during the pandemic, gold has recently benefited from demand resurgence, reaching an all-time high of $2,135 per ounce in December 2023.

QNB identifies three main factors enhancing gold's attractiveness in global investment portfolios:

Inflation Hedge: Gold has recently reaffirmed its value as an effective inflation hedge, especially following the COVID-19 pandemic, which led to significant inflationary challenges in advanced economies.

Monetary Policy Cycle: The anticipated easing of monetary policies in the US and Europe is expected to make traditional cash and short-term government securities less appealing, favoring alternative investments like gold.

Geopolitical Uncertainties: The current global economic climate, marked by uncertainties such as the Russo-Ukrainian War and tensions in the Middle East and between the US and China, could increase the risk premium on traditional assets, driving investors towards alternative safe havens like gold.

The report concludes that gold's appeal is further strengthened by the increasing economic competition between the West and the East, the decline in international cooperation, the escalation of trade conflicts, and the rise in political polarization. Reflecting this trend, central banks worldwide have been accumulating gold at unprecedented rates since the 1960s