Gold has been one of the best performing assets, jumping by nearly 500% from 2002 to the present. However, it seems that this upward momentum is already starting to lose some steam, and authors Avery Shenfeld and Emanuella Enenajor of CIBC World Markets explore the various forces that have contributed to gold’s attractiveness. They examine each supportive factor in turn from inflationary concerns to fears of a steep decline in the US$ against other currencies. Furthermore, they look at the role of gold Exchange Traded Funds (ETF) which have been strong net buyers of the precious metal. The ETF stockpile, and to a lesser extent, long positions in futures markets, could exert downward pressure on gold if investors decide to seek higher returns elsewhere, especially if stock markets generate better returns.
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