The Glistening Project: Why Some Investors Are Looking Again at Gold

For some investors, increasing exposure to gold has been a knee-jerk reaction to bouts of heightened financial market volatility. Franklin Equity Group’s Steve Land says there’s more to gold than that. And he explains why he’s positive about both the prospects for gold and for gold equities.

The return of volatility to global financial markets in October has prompted a resurgence of interest in gold after a quiet summer.

Gold declined for six straight months through September, the longest consecutive monthly downtrend since 1997. After spending much of September and early October in a very narrow trading range, gold prices finally picked up following the equity market wobble in mid-October.

Although we do not make specific predictions on the price of gold, we believe there are some interesting potential catalysts for gold in the current market environment. And in an environment of rising prices, we see significant opportunity in companies that mine gold.

The Golden Role

Gold plays many roles: as jewelry, as a financial asset, and in applications in the medical and dentistry fields. It even has industrial uses in high-end electronics.

Jewelry demand remained solid with a 6% year-on-year (YoY) growth rate during the third quarter of 2018, according to the World Gold Council, with a strong global economic backdrop and 10% improvement from China and India lending support.1

According to our analysis, improving economic activity and positive wealth generation (aided by positive global stock market performance) should offer broadening support for jewelry sales as the jewelry market remains the largest segment of demand for gold.