Q: I am seeking your opinion on gold investments in light of recent announcements in China requiring insurance companies to hold 1% of assets in physical gold. Could this have a material impact on price of gold? already factored into price of gold? Would you consider AEM an attractive opportunity at these prices or have a more reasonably priced alternative? thanks
5i Research Answer:
It should have a positive impact, certainly, in particular because companies will likely sell US Treasuries in order to fund their gold purchases. Estimates are it will create an additional $15B in demand annually for three years, which (based on some reports) could absorb 15% of global production. Keep in mind though that this mandate could be 'posturing' in the ongoing trade wars with the US and could be repealed. Still, it has boosted sentiment and this should continue. We continue to see AEM as quite attractive for the sector.