Conclusion

17 October, 2024

In our view, any model that fails to account for economic growth alongside financial factors will prove insufficient in establishing gold’s long-term expected return.

Our novel contribution highlights the theoretical and empirical importance of economic growth and gold’s role in global portfolios in driving gold prices in the long run.

GLTER complements our other gold pricing models, GRAM and Qaurum, where economic expansion is present but not a central driver given their short- and medium-term focus. And it explains why gold’s long-term return has been and will likely remain, well above inflation.1

Figure 4: Gold’s return over the coming decade will be influenced by expected global economic growth

Expected annual growth in US CPI, global nominal GDP and modelled gold price using GLTER (2025-2040)*

<p class="medium-text">*CPI forecast from J.P. Morgan LTCMA 2024. Assuming forecast horizon of 10-15 years. Expected GDP growth from Oxford Economics Global Scenario service baseline forecast. Equity and bond returns from J.P. Morgan LTCMA 2024 using AC World equities and World Government bonds respectively. Growth in outstanding shares and bonds calculated using 5-year average issuance. Modelled GLTER gold return as described in Table 1.<br>Source: J.P. Morgan, Oxford Economics, World Gold Council. See <a href="/goldhub/research/golds-long-term-expected-returns/appendix"><strong>Appendix A</strong></a> for data descriptions.</p>

*CPI forecast from J.P. Morgan LTCMA 2024. Assuming forecast horizon of 10-15 years. Expected GDP growth from Oxford Economics Global Scenario service baseline forecast. Equity and bond returns from J.P. Morgan LTCMA 2024 using AC World equities and World Government bonds respectively. Growth in outstanding shares and bonds calculated using 5-year average issuance. Modelled GLTER gold return as described in Table 1.
Source: J.P. Morgan, Oxford Economics, World Gold Council. See Appendix A for data descriptions.


<< Previous: A building block approach for expected gold returns

Next: Appendix >>

Footnotes

  1. Using J.P. Morgan long-term capital market assumptions, GLTER suggests that gold return between 2025-2040 is expected to be above that of US Intermediate US Treasury bonds and World government bonds. For more, see Appendix E.

Important disclaimers and disclosures [+]Important disclaimers and disclosures [-]