Gold investment has shifted from wealth accumulation to stability and security, Christian Brenner, chairman and managing director of Philoro Switzerland, tells finews.com. Sustainable gold demand is rising with institutional investors.

Mr. Brenner, given inflationary pressures and the uncertain market environment, precious metal prices have been disappointing. How do you explain the consolidation that precious metals are in, particularly gold?

Other asset classes have suffered much heavier losses this year. Gold has held up comparatively well in a difficult market environment. In a longer lens, the yellow precious metal shows considerable appreciation. Since 2018, the Swiss franc price per ounce has risen by more than 30 percent.

How much uncertainty is reflected in the price of gold?

Thanks to our market presence in the Germany, Austria, and Switzerland (DACH) region, we get a good picture of investor psychology. Our customers currently cite inflation, uncertainty, or concerns about a recession as the main motives for buying.

«Gold is a good hedging product in times of high or imminent demonetization»

In Austria and Germany, the devaluation of the euro is another important argument for buying. Gold is a good hedging product in times of high or impending currency devaluation. The focus of gold investors has shifted from wealth accumulation to stability and security compared to pre-Corona crisis times.

What do you expect on the inflation and interest rate fronts?

Further interest rate hikes given the high inflation momentum could weigh on the price of gold. For the gold market, however, real interest rates are much more important than nominal interest rates. Nominal interest rates correspond to interest rates before taking inflation into account, while real interest rates are nominal interest rates adjusted for inflation. Even in the event of interest rate increases such as the 150 basis points that have been rumored on the market, the real interest rate level remains negative. For gold, this means a market environment that is in itself good. After all, in times of negative real interest rates, the gold price usually tends to be firmer.

Can the euro zone cope with higher interest rates?

The U.S. Federal Reserve has tightened the interest rate reins considerably and thus curbed galloping inflation somewhat recently. But for the southern countries of the eurozone, in particular, rising interest rates are absolute poison because of their enormous debt levels. The European Central Bank will therefore only be able to raise interest rates further very cautiously.

The strong dollar is weighing on the price of gold. Will the US currency weaken soon?

This year, the greenback has benefited greatly from its status as a safe-haven currency, gaining significantly against most major currencies. If the dollar's strength continues, this will certainly hamper the gold price's performance. The most important thing, however, is that investors have a broad diversification and also invest in different asset classes. Gold should not be missing from the mix. It is a sensible building block for any diversified portfolio.

Silver's performance has been particularly disappointing. Has the bottom been reached?

The dry spell for silver has been dragging on forever. Due to heavier industrial use and a bleak outlook for global economic growth, silver has significantly underperformed gold this year.

«I see current silver prices as an entry point»

A look at the current gold-silver ratio shows how cheap silver now is compared to gold. It is quoted at around 90, which is extremely high from a historical perspective. Therefore, I consider the current silver prices as entry prices. I am confident that silver can reach a level of around 40 francs per ounce again over the next few years.

Platinum and palladium - where does the journey lead?

Refiners see a good future for platinum in particular. The platinum price is strongly influenced by trends in the automotive industry. Because of the high palladium quotations, the metal is again being used more often in catalytic converters.

The gold industry does not have the best reputation from an environmental perspective. Can you invest in gold with a clear conscience?

A very important criterion when it comes to sustainability is the certificate of the London Bullion Market Association (LBMA). It stands for the strictest and highest quality requirements, including the environmental guidelines of the mines, the mining conditions of the raw gold, and the production conditions of the gold bars.

«A bar with LBMA certification is a bar with a clear conscience»

This ensures responsible handling of gold that meets ESG standards. An LBMA-certified bar is a bar with a clear conscience.

How important is the topic of sustainability for your company and your customers?

With our Philoro Line, we exclusively sell «Sustainable Gold» that has been produced under ethical and sustainable conditions. In the institutional sector, we are seeing increasing demand for «Green Gold» from our Swiss refining partner Valcambi, which meets various international guidelines such as the LBMA's Responsible Gold Guidance.

What is the premium investors pay for green gold?

For a kilobar, the premium is around 150 to 200 francs.

Is Philoro also involved in the tokenization of gold?

I can't say much about that at the moment, but the fact is that as a precious metals trader we have to deal with this trend. A combination of this new technology with physical gold offers interesting possibilities. But we won't have a gold token ready for the market in the next two or three months.

Which is better for investors: buying gold bars or investing in gold ETFs?

I am a proponent of physical gold. For me, gold is freedom in coin form. It is an anchor of stability in any portfolio.

«With gold ETF, physical delivery is not always so easy»

Exchange-traded funds (ETFs) backed by gold are easy products to trade, certainly. But physical delivery is not always so easy when I need the gold. There can be restrictions and problems, and banks sometimes have very different conditions.

What proportion of gold should investors hold in their portfolio?

Especially in times of crisis, gold is a portfolio stabilizer. In the current environment, we recommend a precious metal allocation of 10 to 15 percent, with an emphasis on gold.

What is your market outlook for the rest of the year?

If interest rates stop rising sharply and inflation remains at a high level, then it will probably be gold's time to shine. We may see record prices by the end of the year. In the long term, I am convinced that the gold price will climb to new all-time highs.

Vienna-born Christian Brenner has several years of experience in gold trading, and mainly active in wholesale trading. He has also gained a great deal of experience in the advertising and media sector. His affinity for precious metals was a hobby horse since the very beginning. As Chairman of the Board of Directors and Managing Director of Philoro's Swiss subsidiary, he manages the fortunes of the precious metals trader from St. Gallen.