LONDON – Gold could become attractive as a “hedge against risk” and “diversifying asset” for institutional investors in Japan, Marcus Grubb, managing director of investment at the World Gold Council, said.
In an interview, Grubb said the two main drivers for a move to gold will depend on what will happen to the yen and where the money will shift from cash deposits and bonds.
“We are very positive for the long-term picture of the gold market. The price is extremely favorable,” added Grubb.
There is an increasing gap between gold demand and supply, with mine production flat over the past 10 years. Annual demand for gold is 4,400 tons a year, while 2,800 tons is provided from mine production and 1,800 tons comes from recycled jewelry.
Central banks and private investors are competing to buy gold rather than sell it, as a hedge against the potential depreciation of global currencies and fear about inflation in the future when economic growth does return eventually, Grubb said.
“Investment demand remains strong at the moment” on two fronts, said Grubb, as Western demand is driven by fear in financial markets and the middle classes expand in China and India over the coming decade by hundreds of millions.
“The average age of the population is very young (in China and India), so there will be more weddings and celebrations,” he said.