October 29 Benefits and Pensions Monitor Daily News Alerts

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Gold Prices Rising Before Pandemic

Before there was a global pandemic and the resulting national lockdowns, macro-economic and political issues were driving the price of gold higher, says George Milling-Stanley, chief gold strategist at State Street Global Advisors. This was in contrast to the period from June 2013 through to June 2019 when gold traded within a relatively narrow range topping out at around $1,350 an ounce, he said at its ‘The Rise of GOLD ? State of the Market.’ During that time, it seemed like every time the price popped its head above the $1,350 level, the speculative community, led by the hedge funds, played “whack-a-mole” by selling gold short and driving the price back down into the established range. In fact, gold was building a substantial head of steam as this period progressed, and that really started to become apparent in early 2018 and it was already above $,1600 an ounce by February 2020 prior to the COVID-19 pandemic. Now, with the U.S. seeming to fail in its efforts to re-open the economy, gold has the potential to continue to strengthen. “Consider this scenario,” he said, “if the U.S. continues to fail at reopening offices, factories, and stores and if colleges and schools are being forced to close up again after re-opening too soon and some areas of the country are facing renewed lockdowns ?  and the picture isn't so very different in Western Europe ? there'll be no drop off in the heavy demand for gold as an investment in the industrialized world,” he said. Even with the current circumstances, gold does have potentially different functions, said Maxwell Gold, head of gold strategy at State Street Global Advisors. These uses range from capital appreciation, potentially driving portfolio returns, and capital preservation. He said gold has an historic track record for over 1,000 years of creating value and preserving wealth. In the context of gold as a source of diversification and as risk management tool, investors should be thinking about adding gold to their portfolios. In fact, the “cautionary tale for investors looking for true diversification today” is that gold is a great option for a fully diversified solution portfolio. And gold can have huge impact to the portfolio, without needing an overwhelmingly high allocation to start. He said a starting point with an allocation to a portfolio of anywhere from two to 10 per cent, investors will see the advantages of gold as an asset class.

Benefits Costs Outpace Inflation

Employer-provided medical benefit costs in Canada are forecasted to rise seven per cent in 2021, outpacing general inflation by 5.7 per cent, says Aon’s ‘2021 Global Medical Trend Rates Report.’ The increase for Canada employer-sponsored medical plans expected next year is due to a combination of higher costs from the increased spend for drugs in general, reflecting the many health risk factors facing Canadians today and the expectation of the continued introduction of new and expensive therapies. While several of these risk factors are manageable through a combination of drug therapies and other wellness initiatives, employers are increasingly looking at the bigger picture to determine the approach they want to take to mitigate costs. “The claiming patterns throughout 2020 have been significantly impacted due to the restrictions on both employees and the providers of medical and dental services due to the COVID-19 pandemic,” says Greg Durant, Canadian chief actuary for health solutions at Aon. “Based on our analysis, health per capita claims on an annualized basis are expected to be almost 10 per cent lower than expected and dental per capita claims are expected to be in excess of 20 per cent lower than expected during 2020. The questions we all want answers to are when will these claiming patterns recover, and what will be the ‘new normal.’”

For details on these stories, visit www.bpmmagazine.com

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