As current challenges in the global economy are unlikely to disappear any time soon, long-term investors should consider increasing their gold holdings instead of reducing them.
A similar strategy has already been employed by central banks in many economies of the world. Despite a significant growth of the U.S. dollar against other currencies this year and its status as a safe-haven asset, there still is a possibility of it losing its significance in the future. A global transition to a multipolar world with several currency blocs might hit the dollar’s position hard.
Another possible prospect is that inflation may continue exceeding yields of bonds with high credit ratings. An inflation level of 2%, which is the target level for the Fed and the ECB, is possible only in case of a dramatic drop in commodity prices. But the situation with the supply of raw materials is still notably tense.
The global problem of high inflation won’t be resolved all by itself. Moreover, there are even more issues affecting the world economy besides the energy crisis. Thus, gold will remain attractive for various groups of investors, as it is a reliable asset protecting from crises and inflation.