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Gold Provides Long-Term Volatility Protection

Gold Provides Long-Term Volatility Protection

Gold bullion and silver are seeing record low levels of volatility at the moment, whilst many economies are seeing economic volatility.  Historically, the implied volatility of the precious metals marketplace has been around 4 to 5% change in either direction.  The current year has seen this volatility lower to around 1 to 2% of the market price.  Why is this the case?

Supply levels

As has been noted before gold, in particular, is not in short supply at the moment.  There are signs downstream that we may actually be reaching the end of a period of historically high productivity.

The higher levels of supply and the high levels of demand coming from expanding markets in Asia are effectively creating a very stable marketplace. Supply is effectively meeting demand and creating price stability.

Whilst this is frustrating for investors looking to make quick returns, it does demonstrate how gold is a relatively stable investment and ideal as a hedge against volatility.

Growth outside of Europe and North America

The traditional markets for gold buying have usually been in developed countries. However, the continued enrichment of China and India, in particular, are creating new markets for the enhanced supply.  The middle east is also a growing market as people look to put their wealth into more tangible assets.

This is leading to a gradual movement rather than a series of mass plunges in and out of gold – meaning market stability. These new markets are taking up a lot of the extra supplies, ensuring that the price doesn’t fall due to oversupply.

Continuing good economic performance

Despite shocks to the economic system such as Brexit in Europe and trade wars instigated by the USA, the majority of economic performance seems good. From an investors point of view, it is easy to switch markets to something more profitable as there is good liquidity in the market.

This liquidity and good performance of stocks and shares have meant that many investors are bearish about the need to move their profits into gold. This means that even for the nervous investor, gold has not yet taken on the solemnity of a safe haven.

Seen on a graph, demand is flat rather than slopping up or down and this is leading to the relative strength of the market.

Gold bullion investment for financial stability?

If you are looking for financial stability over the next few months (particularly with Brexit less than 6-months away then gold bullion could be the solution to your investment needs.

The Gold Bullion Company offers great rates on physical gold products that you can store for yourself at home or in a secure facility.