World Gold Council Sees Gold Staging a Comeback

In looking at the first-quarter World Gold Council report, finding good news was no simple feat. Things have changed, and they have changed handily. Gold’s rally was shown by the council to have surprised many market participants. It even points to how many analysts were predicting lower prices ahead, not higher prices.

The World Gold Council’s mid-year report shows that some investors took advantage of the 2013 sell-off to buy gold. That being said, the report also indicates that investment demand in gold has remained tepid — something likely to change.

Another take is that in the second half of 2014 there are good reasons to own gold. The World Gold Council said:

We consider that the current environment of high bond issuance, tight credit spreads and record low volatility continues to offer a prime opportunity for investors to add gold. We consider that the current environment of high bond issuance, tight credit spreads and record low volatility continues to offer a prime opportunity for investors to add gold. In our view, gold can reduce overall portfolio risk and it is cheaper to implement than many volatility-based strategies.

ALSO READ: Merrill Lynch’s 10 Growth Stocks to Buy for the Rest of 2014

24/7 Wall St. has also shown several key drivers of gold lately. RBC showed is top five gold stock picks for the rest of 2014. Sterne Agee was also positive on selective gold and silver miners, offering up four gold-mining picks.

Also, one technical analyst whom we respect is very bullish on gold. Gold is around $1,325 per ounce now, and his take is that gold is heading to $1,500 or thereabouts.

As far as the World Gold Council’s outlook on investment, it sees that interest in gold is gaining momentum. It signaled that net long positions in the futures market have gradually increased as short positions have been covered, exchange traded funds (ETFs) have experienced inflows in recent months and coin sales are increasing.

After looking at the data, we looked at the SPDR Gold Shares (NYSEMKT: GLD) ETF. The fund currently holds 800.05 tonnes, with a net asset value of more than $34.3 billion.

One thing that may help is that the World Gold Council sees investors loading portfolios with higher-risk debt — with high-yield debt issuance on track to be 30% higher in 2014 versus 2013. Another bullish driver longer-term is that the low volatility is suggested as a time to buy. Lastly, gold is still highlighted as a protection vehicle.

ALSO READ: The Growing Case for a Return to $1,500 Gold