Gold's Historical Significance and Economic Role

Gold has maintained a pivotal role in the global economy due to its unique characteristics and historical significance:

• Long Track Record: Gold has been valuable for millennia, known for its aesthetic worth and resilience to tarnishing.
• Economic Stability: Historical data illustrates gold's consistent value, such as the cost of bread during Nebuchadnezzar's era comparing to modern prices.

Gold's Price Fluctuations and Geopolitical Influence

Several factors contribute to gold's price volatility, particularly geopolitical and economic dynamics:

• Financialisation: The introduction of Exchange-Traded Funds (ETFs) in 2004 enabled broader investment in gold, increasing its price.
• De-dollarisation: Countries like China are moving towards reducing reliance on the US dollar, bolstering their currency with gold reserves.
• Supply and Demand: Gold supply is rigid, primarily dependent on mining and recycling, making prices sensitive to demand shifts.

Gold's Volatility and Investment Dynamics

Gold is both a stable long-term asset and a volatile short-term investment:

• Historical Value Retention: Over centuries, gold has preserved its value, though it can be unreliable over shorter periods.
• Volatility: Its price volatility is comparable to the S&P 500, showing mixed performance against inflation historically.
• Portfolio Hedging: Gold often provides positive returns during stock market declines, aiding in risk reduction despite its inherent volatility.