A gold rush of sorts could be on the horizon as a result of the stand-off between US president Donald Trump and North Korea, according to Ned Naylor-Leyland, manager, Old Mutual Gold & Silver at Old Mutual Global Investors.
Across the last few weeks gold and silver prices have, according to OMGI research data, seen a jump as the Trump/North Korea stand-off has escalated.
And with no diplomatic solutions in sight and tensions increasing, Naylor-Leyland believes that the precious metals market – often seen as a safe haven during times of crisis – could be the place that investors on both the retail and institutional side flock to.
“While the two monetary metals continue to trade mostly on real yield dynamics, some investors reacted to the escalating tension by buying these traditional safe-haven instruments,” said Naylor-Leyland, (pictured left, speaking at International Investment’s sister title InvestmentEurope’s recent DACH Summit in Munich).
“In the event that war should break out, and that leads to an acceptance of further loose monetary and fiscal policy in the US, we would expect a falling US dollar real yield environment, giving renewed, and sustainable, impetus to monetary metals prices.”
Institutional investors and wealth managers in particular appear to be, once again, considering an allocation to gold, despite current institutional allocations are at their lowest, relative to historic levels.
Should the larger investors start re-allocating funds into this asset class, Naylor-Leyland believes that a “big move” in global gold prices will inevitably ensue.
“Gold, of course, is already a core asset class for central banks, the super-rich and what are classified as ‘the global poor’,” he added.
“Should the North Korea situation develop it may just prove to be the catalyst to push the institutional world to commit flows back to this asset class on a sustained basis.”