Global recession risk has increased, with VIX up to 25 and hovering around 20 recently. The US 10-year bond yield once fell below 1.6%, reflecting worries about the economy outlook and increasing risk-averse sentiment. Funds generally flow into gold to counter the depreciating of other risky assets. In the meanwhile, global interest rate cuts make the gold more attractive under the expectation of monetary easing. Moreover, the reverse relationship between the gold and USD has breached recently – they have been moving in the same upward trend since May. On the demand side, central banks have successively increased their gold reserves and gold ETFs have recorded net inflows continuously, both supporting the gold price. The price broke through $1,500 per ounce on Aug 7 with 20% year-to-date growth. Gold price has been sliding from USD 1,600 per ounce since the end of Q1 2013, investors should keep an eye on the current price momentum for that level. Therefore, it is recommended to increase the holdings of gold-related stocks amid the downside risks and easing monetary policy.


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