The analysis of a commodity is a reasonably straightforward matter: production is reviewed to see what changes have taken place and similarly with consumption.
An adjustment is then made for global economic conditions and whether there is likely to be a shortfall or surplus in demand or supply compared with previous years. On that basis a forecast is delivered.
Currency analysis differs in that interest rates are taken into account and consideration of governmental policy is thrown in to the mix. This is clearly a gross simplification of the process, otherwise we could expect all estimates to be 100 per cent correct - something that is rarely if ever achieved.
But what do you do about a product that is a hybrid of the two? Where some investors focus on its commodity aspects and others on its currency features? That is the problem with gold. About 2,450 tonnes of the metal is produced each year but since gold is not destroyed in the "consumption" process all that really happens is that the stocks of the metal are being added to each year.
A generally accepted estimate is that there are now some 165,000 tonnes of gold that have been mined in the history of the world. Some of that is in museums, some held as "sentimental" jewellery that will never be sold, 30,000 tonnes still sits with central banks but much of it is being hoarded in bars, coins and "investment" jewellery. So if supply and demand are the key determinants then it is obvious that gold should simply fall each and every year as global stocks increase.
Similarly, interest rates are often cited as a key driver of currencies: the greater the yield the more attractive that currency becomes to investors and hence its exchange rate will tend to rise. So what about a "currency" that has no yield for the majority of investors? True, it can become attractive if nothing else produces a return but that simply puts it in a category along with everything else - indistinguishable from the general morass.
What then of an investment that has increased fivefold in value over the past 10 years despite global stocks increasing from 140,000 tonnes to 165,000 tonnes and where six-month interest rates have collapsed from 2 per cent to 2 basis points over the same period? Clearly neither the currency nor the commodity component are in the ascendency yet equally obviously a major change has taken place to account for this apparent contradiction.
While there are a number of theories looking to account for this, my view is altogether more straightforward and encapsulated in the accompanying chart which I have dubbed the "trust gap".
In this chart both gold and the US consumer price index have been indexed to 100 and set back to 1975. The notion being to see the relative performance of gold against what is often trumpeted as one of its main attributes: that of a hedge against inflation. As can be seen in the late 1970s and early 1980s gold moved ahead of inflation. This was a period when the world had been subjected to a series of oil price shocks, inflation was viewed as rampant and out of control, the US government was headed by Jimmy Carter and the populace was faced with watching its citizens being held hostage in Iran.
As we moved through the 1980s inflation was seen as tamed by figures such as Paul Volcker and Alan Greenspan in the Federal Reserve with Karl Otto Poehl and Hans Tietmeyer in Germany's Bundesbank. Equally important was the notion of strong government in these countries. Put succinctly there was trust in the ability of government and its agencies to deliver stable growth and low inflation - the so-called "Goldilocks" economy. Understandably, it seemed an asset that protected against inflation, was no one else's obligation and was seen as a store of value, had become redundant.
However, as the dotcom boom gave way to the dotcom bust, as the housing bubble exploded and the credit crunch took hold, gold began to move up towards the inflationary trend before finally breaking up through it on the woes of the global financial system. The picture emerged of gold as far above inflation now as it was below it in the late 1990s when European central banks were selling the metal. Notably, the selling has dried up as the gold price has soared and instead we have seen nations such as China, Russia, India and Saudi Arabia all buy the metal.
So what has changed? To me, an investment that is trumpeted as being outside the financial system is irrelevant when there is trust in that system. Remove that and in a period of uncertainty and financial stress this notion of being separate is key. So, as the world focused on expansionary monetary policies and quantitative easing (printing money), the fear was of inflation.
However, with the idea starting to take hold that the world is no longer facing the threat of rapidly rising prices but of deflation, does this then negate the argument?
Gold is not so much a shopping list of attributes but in fact one very simple one - it is a hedge against financial uncertainty and dislocation.
While investors remain unsure of the future and of their governments and monetary authorities to return to a time of steady growth and prices then the attractions of gold will remain.
Consequently, it will continue to appeal to a widening group of investors and as such its appeal, and price, can rise even while stocks of the metal continue to increase.
Jonathan Spall is director, commodities distribution at Barclays Capital, and is based in London
MATCH INFO
Champions League quarter-final, first leg
Tottenham Hotspur v Manchester City, Tuesday, 11pm (UAE)
Matches can be watched on BeIN Sports
FIXTURES
All kick-off times UAE (+4 GMT)
Brackets denote aggregate score
Tuesday:
Roma (1) v Shakhtar Donetsk (2), 11.45pm
Manchester United (0) v Sevilla (0), 11.45pm
Wednesday:
Besiktas (0) v Bayern Munich (5), 9pm
Barcelona (1) v Chelsea (1), 11.45pm
UAE currency: the story behind the money in your pockets
Sarfira
Director: Sudha Kongara Prasad
Starring: Akshay Kumar, Radhika Madan, Paresh Rawal
Rating: 2/5
Genesis G80 2020 5.0-litre Royal Specs
Engine: 5-litre V8
Gearbox: eight-speed automatic
Power: 420hp
Torque: 505Nm
Fuel economy, combined: 12.4L/100km
Price: Dh260,500
EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE
Edinburgh: November 4 (unchanged)
Bahrain: November 15 (from September 15); second daily service from January 1
Kuwait: November 15 (from September 16)
Mumbai: January 1 (from October 27)
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Colombo: January 2 (from January 1)
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Lyon: March 1 (from December 1)
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Source: Emirates
COMPANY PROFILE
Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)
TWISTERS
Director:+Lee+Isaac+Chung
Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos
Rating:+2.5/5
The specs
Powertrain: Single electric motor
Power: 201hp
Torque: 310Nm
Transmission: Single-speed auto
Battery: 53kWh lithium-ion battery pack (GS base model); 70kWh battery pack (GF)
Touring range: 350km (GS); 480km (GF)
Price: From Dh129,900 (GS); Dh149,000 (GF)
On sale: Now
'Skin'
Dir: Guy Nattiv
Starring: Jamie Bell, Danielle McDonald, Bill Camp, Vera Farmiga
Rating: 3.5/5 stars
Company profile
Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices
The specs: 2018 Chevrolet Trailblazer
Price, base / as tested Dh99,000 / Dh132,000
Engine 3.6L V6
Transmission: Six-speed automatic
Power 275hp @ 6,000rpm
Torque 350Nm @ 3,700rpm
Fuel economy combined 12.2L / 100km
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Real Madrid 3 (Kroos 4', Ramos 30', Marcelo 37')
Eibar 1 (Bigas 60')
F1 2020 calendar
March 15 - Australia, Melbourne; March 22 - Bahrain, Sakhir; April 5 - Vietnam, Hanoi; April 19 - China, Shanghai; May 3 - Netherlands, Zandvoort; May 20 - Spain, Barcelona; May 24 - Monaco, Monaco; June 7 - Azerbaijan, Baku; June 14 - Canada, Montreal; June 28 - France, Le Castellet; July 5 - Austria, Spielberg; July 19 - Great Britain, Silverstone; August 2 - Hungary, Budapest; August 30 - Belgium, Spa; September 6 - Italy, Monza; September 20 - Singapore, Singapore; September 27 - Russia, Sochi; October 11 - Japan, Suzuka; October 25 - United States, Austin; November 1 - Mexico City, Mexico City; November 15 - Brazil, Sao Paulo; November 29 - Abu Dhabi, Abu Dhabi.
A QUIET PLACE
Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou
Director: Michael Sarnoski
Rating: 4/5
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
The specs
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Education: Medical doctor
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Sinopharm vaccine explained
The Sinopharm vaccine was created using techniques that have been around for decades.
“This is an inactivated vaccine. Simply what it means is that the virus is taken, cultured and inactivated," said Dr Nawal Al Kaabi, chair of the UAE's National Covid-19 Clinical Management Committee.
"What is left is a skeleton of the virus so it looks like a virus, but it is not live."
This is then injected into the body.
"The body will recognise it and form antibodies but because it is inactive, we will need more than one dose. The body will not develop immunity with one dose," she said.
"You have to be exposed more than one time to what we call the antigen."
The vaccine should offer protection for at least months, but no one knows how long beyond that.
Dr Al Kaabi said early vaccine volunteers in China were given shots last spring and still have antibodies today.
“Since it is inactivated, it will not last forever," she said.
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Produced: Luv Films, YRF Films
Directed: Akiv Ali
Cast: Ajay Devgn, Tabu, Rakul Preet Singh, Jimmy Sheirgill, Jaaved Jaffrey
Rating: 3.5/5 stars
England's all-time record goalscorers:
Wayne Rooney 53
Bobby Charlton 49
Gary Lineker 48
Jimmy Greaves 44
Michael Owen 40
Tom Finney 30
Nat Lofthouse 30
Alan Shearer 30
Viv Woodward 29
Frank Lampard 29
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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2. Sam Bennett (Irl) Bora-Hansgrohe
3. Elia Viviani (Ita) Ineos Grenadiers
4. Dylan Groenewegen (Ned) BikeExchange-Jayco
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6. Arnaud Demare (Fra) Groupama-FDJ
7. Max Kanter (Ger) Movistar Team
8. Olav Kooij (Ned) Jumbo-Visma
9. Tom Devriendt (Bel) Intermarché-Wanty-Gobert Matériaux
10. Pascal Ackermann (Ger) UAE Team Emirate