EVLI PLC PRESS RELEASE JUNE 7, 2024, AT 8:47 AM (EET/EEST)

Expert: Central banks let the genie out of the bottle in 2009 – and now they are unable to get it back in

Demand for gold as an investment has been strong lately and the nominal price of gold has reached a new peak this year. Petter Langenskiöld, Portfolio Manager of the Evli Silver and Gold Fund*, which invests in globally listed precious metals equities, believes that gold and silver prices will be significantly higher in the future than they are today. The backdrop to this is a development that began 15 years ago.

Langenskiöld sees gold’s value as an investment on the rise because Western central banks made a decision in the aftermath of the 2008 financial crisis that is now very difficult to reverse.

"As part of the defense mechanism to fight the financial crisis in 2009, central banks began circumventing the system's ’taboo’ against funding their own countries and, in a highly exceptional measure, resorted to a massive monetary stimulus. Since that moment, and as a result of the indirect financing of their own countries by the central banks, Western countries are now the largest owners and financiers of their own sovereign debt. Because the states own their central banks, that means they are indebted to themselves, which is, obviously, impossible. This was initially intended to be temporary, but in spite of everything, it is still going on. As this situation will prove very difficult to unwind, a position in gold may be something for investors to ponder," concludes the portfolio manager.

As a result of these developments, Langenskiöld believes the price of gold is set to rise in the future. He views the elements affecting the dollar price of gold as being roughly divided into two categories: one key issue and then other factors.

"The key issue is that the over-indebtedness of Western governments creates a situation whereby it’s no longer really possible for them to have an independent monetary policy, fiscal dominance is stronger than perhaps ever Put simply, one could say that the gold market has begun to suspect that it may no longer be possible to raise interest rates and reduce the monetary base - regardless of what happens or doesn’t happen to inflation."

He also points to other factors affecting the price, such as the repercussions of the partial freezing of Russia's foreign reserve assets and how that affects the behavior of other countries, as well as China's actions.

"The situation in Russia has led to an increase in the share of gold in the reserves of various countries, many have also called for a repatriation of their gold bullion held abroad. However, as the biggest player in the ’rest of the world’, China's actions are of primary importance. Among those in the gold circles, so to speak, there is a fairly widespread perception that the Chinese state's actual gold holdings are higher than the officially declared amounts. In any case, China has been buying quite a lot of gold lately. China is also said to have stockpiled other metals, such as copper. I dare not judge what China might be planning or thinking," says Langenskiöld.

Should everyone have gold in their portfolio?

So, how should you go about investing in gold now?

"Personally, I have preferred the approach of setting aside a smaller portion of the portfolio for gold investments, and that this portion consists of both gold itself and of gold mines. At the same time, a reminder that it is important not to forget silver and platinum group metals. And, of course, in all investments you should be careful, use discretion and remember to diversify. This also applies to gold and especially to precious metal equities," says Langenskiöld.

The portfolio manager believes that gold bullion can be compared to foreign currency deposits, with the difference being that its ability to maintain its purchasing power is much better.

"Let me give you an example: until the early 1970s, the Finnish markka currency had a so-called ’base value’, according to which, as part of the then 'Bretton Woods' currency system, one markka was worth 0.211 grams of gold. If you had €1,000 of today's notes at that time, their nominal value today would still be the same €1,000, while the same ’base value’ of the gold equivalent of €1,000 then would be around €88,000 today," Langenskiöld illustrates.

*Evli Silver and Gold was established in January 2016 and is the only Finnish equity fund investing in globally listed precious metal mines. The fund is a top-performing precious metal mining fund in international performance comparisons.

Additional information:
Petter Langenskiöld, Portfolio Manager, Evli Fund Management Company Ltd.
Tel: +358 50 563 8933, petter.langenskiold@evli.com

Evli Plc

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² Kantar Prospera External Asset Management Finland 2015, 2016, 2017, 2018, 2019, 2021, 2022, 2023. Kantar Prospera Private Banking 2019, 2020 Finland.
³ SFR Scandinavian Financial Research Institutional Investment Services Finland 2021, 2022. Kantar Prospera External Asset Management 2017, 2018, 2019, 2020, 2023 Finland.


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