(World Gold Council) – Stop holding your breath at every word out of Ben Bernanke’s mouth, the World Gold Council said.
In a research with a title “Gold and the US interest rates: a reality check” the organization warns against putting too much weight on the US Federal Reserve’s hints that it could or could not taper quantitative easing program.
It was reported “A normal rate environment – with real interest rates ranging between 0% and 4% or approximately 2.5% to 6.5% in nominal terms – is not automatically adverse to gold. In such a rate environment, gold’s inclusion in a portfolio has historically been beneficial to investors.”
Just last month the yellow metal decreased to September 2010 levels after Ben Bernanke, soon-to-be-former chairman of the Federal Reserve, said that he had a “moderately optimistic forecast” for the US economy.
US senator’s questioned Bernanke about the gold price and he answered with:
“Nobody understands gold prices and I don’t really pretend to understand them either.”
Actually, the impact of interest rates on the gold price has gone down, the WGC says. With markets booming beyond the US borders the WGC emphasizes that “gold is not solely tied to US sentiment and behavior.”
Emerging markets rose nearly 70% of world-wide physical gold demand (counting ETFs), while the US signifies less than 10%.
Gold investments have been historically quite positive, the WGC claims, with long-term average yearly returns of 6-7%.
Putting too much emphasis on the US interest rate “oversimplifies the issues currently at play,” said Juan Carlos Artigas, head of investment research at the Council.
Artigas, citing the Chinese market where gold consumption increased by 132% between 2007 and 2012 said “In the event of a return to a more normalized real rate environment in the US it is worth remembering that investment demand is not the only arbiter of gold prices, nor does it originate solely in the US,”
“Even with the highest rate of interest, the core value of gold is to balance out a portfolio,” says Artigas. “Most investors are under allocated; optimal levels are identified as between 2% and 10%.”