Institutional investors are showing renewed interest in gold due to the softer U.S. dollar, rising bond yields and concern about stretched asset valuations. Some big investors are seeking to diversify their portfolios and taking a hard look at gold as an asset class to hedge against any potential market turmoil.
Large investors are looking for complementary assets that will hedge their portfolio, in case the global market faces some turbulence, Sprott Asset Management's CEO John Ciampaglia said in an interview. These investors don't necessarily think that gold prices will see a significant rally, rather, they are seeking a safe haven in the physical asset. In fact, interest has been so high that some of these institutional investors have been reaching out to Sprott "for the first time in years" regarding asset diversification through gold, according to Mr. Ciampaglia.
Spot gold has rallied about 26 bper cent since falling to its December 2015 low of $1,051.10 per ounce and has held steady above $1,200 per ounce since early 2017. Even though silver closely follows gold, more interest has focused on gold among precious metals as it tends to act as a better portfolio hedge than silver, according to Mr. Ciampaglia.
Sprott Asset Management is also seeing increased interest from investors in mining and mining-related Exchange Traded Funds. Sprott runs two gold miner ETFs and four closed-end, physical precious metals funds, one of which started trading recently under the symbol CEF, after it was created through the acquisition of Central Fund of Canada.
Concern about the direction of global stocks after an historic bull market is backed by a recent Blackrock study. It showed that big global institutional investors are bracing for risks, and increasingly hungry for actively-managed strategies across a range of alternative assets.