In 1971, U.S. Secretary of the Treasury John Connally proclaimed to G10 finance ministers that ‘the dollar is our currency, but it’s your problem’. At a time when the dollar’s place at the centre of the global financial system was unchallenged, this was a statement of fact.
The global low interest rate environment has fuelled investor interest in a number of strategies and investment styles to exploit alternative sources of (uncorrelated) returns – among them investing in risk factors different to the classical risks such as equity market, inflation/duration and corporate credit risk.
After strong gains in the first half of 2016, the gold price came under pressure in the fourth quarter last year. We expect the upward trend to resume in 2017. The headwind from US dollar appreciation and the rise of bond yields should abate, and investment demand should pick up again, also taking into account the many risk factors.