Gold’s quiet comeback

Gold has made an unheralded, but impressive comeback this year following a 30% drop in 2013. It has risen by over 9%, beating commodities, bonds and UK equities. It hit a four-month high of around $1,340 last month as the eurozone crisis briefly flared up again. Further gains look likely over the next few years.

Gold struggled last year as the US Federal Reserve began to ‘taper’ the amount of money it was printing. The prospect of even mildly tighter US monetary policy was seen as bad news for an asset that thrives on fear, bad news, and the threat of inflation. But tapering is now “priced in”, reckons Citigroup.

With interest rates still at historic lows, fears of eventual inflation have hardly gone away. And the longer rates stay low, the greater the risk of bubbles forming and bursting, adds Bank of America Merrill Lynch (BAML), a worry that may bring new buyers into the market.

The appetite for gold from central banks and increasingly wealthy consumers in emerging markets remains healthy. Demand for gold jewellery has just recorded its best first quarter since 2005, according to the World Gold Council.

Throw in a wide range of geopolitical jitters, and it’s no wonder BAML sees gold averaging $1,375 next year, up from $1,308 in 2014.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
What a farce!

John Stepek on surviving the Greek fallout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

From ADRs to Z scores – all the terms you wish you understood, but were too embarrassed to ask about.

Gervais Williams: if you want real dividend growth, buy small-cap stocks

Merryn Somerset Webb interviews small-cap stock expert Gervais Williams about how penny shares outperform blue chips 'again and again'.


30 June 1937: The 999 emergency services line opens


On this day, the 999 emergency services telephone line opens in London, but it wasn't until a week later that the first call was received when a man spotted a burglar in his garden.


Anatomy of a Grexit: how Greece would go about leaving the euro

Jonathan Loynes and Jennifer McKeown, economists at Capital Economics, look at the key issues and challenges of a Grexit, how it might be best managed, and set out a timetable for change.