Recently, the WGC published a fresh Investment Update entitled It may be time to replace bonds with gold.Is it?

According to the report, investors are now facing the environment with flat to inverted yield curves, stock valuations at extreme levels that historically preceded meaningful stock sell-offs, and an increasing set of geopolitical concerns, including trade tensions, Brexit and Middle East turmoil. Given this backdrop, gold should be part of each investment portfolio as a safe-haven asset.

However, the WGC claims that gold has an even greater role to play today. This is because the central banks have shifted to a new regime of easy monetary policy, thus reducing expected bond returns. The point is that with negative yielding debt at all-time highs, gold may become a more attractive portfolio diversifier.

After all, the opportunity costs of holding gold have declined recently thanks to the central banks' dovish shift and ultra-low bond yields. Normally, the fact that gold does not pay any interest or dividends can deter investors, but in a crazy world of negative interest rates totaling more than $17 trillion (that's about 30 percent of all investment-grade securities bearing sub-zero yields), the opportunity costs of holding gold have decreased substantially or even transformed into competitive advantage.

Hence, it seems that replacing some bonds with gold could be reasonable, especially since that the yellow metal has historically performed well in the year following a dovish U-turn in the Fed's stance, and it also performed exceptionally well when real interest rates were negative or just close to zero.

An analysis based on historical returns, when interest rates were at more normal levels, suggests that gold should amount to 2-10 percent of the investment portfolio, depending on the particular asset composition and the risk taken. But adjusting the model for lower expected returns for bonds in a low interest rate environment we face today, the optimal gold allocations increases by an additional 1-1.5 percentage point to 3-11.5 percent of the investment portfolio.

OK, would you like to know what I think about the WGC's newest investment update, and whether it makes sense? If so, I encourage you to read the full version of today's Fundamental Gold Report, which assesses and develops the WGC's research. In order to receive the following (posted bi-weekly) analyses and stay informed on all things fundamentally golden, please subscribe now on our website. Right now the first 3 weeks of subscription are for mere $9 – we encourage you to catch the discount while it’s still available.

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This week, the WGC published a new edition of its quarterly report on gold demand. According to the organization, in the third quarter of 2019, the demand for gold amounted to 1,108 tons, declining 3 percent from the previous quarter, but still rising 2.7 percent year-over year.

The main driver of the annual increase were strong ETF inflows. Holdings in global gold-backed ETFs grew by 258 tons in Q3, the highest level of quarterly inflows since Q1 2016, reaching a new all-time high of 2,855 tons. The inflows were supported by accommodative monetary policies, continued geopolitical uncertainty, global economic slowdown, the prevalence of negative-yielding sovereign debt, along with safe-haven and momentum buying. Unlike the previous quarter, most of global ETF inflows during the third quarter were directed towards the U.S.-listed funds, not UK-listed funds. It indicates that investors are now less afraid of Brexit and more of possible downturn in America.

The surge in ETF inflows outweighed weakness elsewhere in the market. Global bar and coin demand halved year-over-year, dropping to 150 tons, its lowest quarterly level since Q1 2008. Similarly, jewelry demand was down 16 percent to 461 tons in Q3. The main cause of these declines were higher gold prices, which forced retail investors to defer purchases. It confirms our thesis that demand for gold bars, coins and jewelry does not drive the gold prices, but it is driven by them!

Central banks added 156 tons to their reserves in Q3. Although central bank buying remained healthy, it was significantly lower than the record levels of Q3 2018, declining 38-percent. Turkey, Russia and China led the way among the central banks purchasing gold.

Technology demand faced continued challenges and declined 4 percent, hit by slower global GDP growth and U.S.-Sino trade war. Last but not least, the supply of gold grew 4 percent, driven by a 10-percent jump in recycling (high gold prices encouraged people to sell back more gold), which more than outweighed the 1-percent decline in mine production.

As always, we remind investors to take the WGC report with a pinch of salt. Or, rather a bowl of salt! Their data is not adequate, or I should say "flawed."

Would you like to know why? If so, I encourage you to read the full version of today's Fundamental Gold Report, which explains what is wrong with the WGC's analysis. If you already knew that, that's great, but you can still benefit from our analysis, as I will examine the gold market in Q3 the comprehensive way it should be done! I will also draw fundamental investment implications for the rest of the year, so the full read will be valuable! In order to read the full version of today's analysis and receive the following (posted bi-weekly) analyses, and stay informed on all things fundamentally golden, please subscribe now.

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Here we go, Ladies and Gentleman! Gold hit $1,500! Is the round number of $1,600 in cards now? In today's article, we'll keep focus just on the fundamental domain and speculate on the current alignment of these factors - looking merely at them will warm the heart of many a gold bull.

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Last week was definitely hot. Both major central banks adopted a more dovish stance. Gold reacted positively, jumping above $1,400. What has changed, and what has not? How close are we to an actual rate cut, not only to the speculation of getting one for sure on the next Fed meeting? How will gold like it?

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Super Mario delivered a surprisingly dovish speech. But he was shortly outshined by Super Jerome. Both key central banks have sent new signals to the markets for interpretation. Let's read the tea leaves and make sense of the initial reaction in the gold market.

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