Gold has risen for 12 years in a row. But it looks unlikely to extend its run to 13 prices have fallen by almost 25% this year, to a near three-month low.
The prospect of America breaching its debt ceiling hasn't given gold much of a lift, largely because markets seem to have assumed that a deal will be done.
Moreover, during the past few months, the prospect of the US Federal Reserve making a gradual exit from its money-printing programme has prompted selling by institutional investors.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This has been offset by, but not fully compensated for, strong demand for jewellery, coins and gold bars in Asia. But recently, Chinese demand has faded. So the short-term view is not encouraging.
However, investors should continue to hold a small amount of gold as insurance. Longer term, as incomes in emerging markets grow, demand for jewellery, or for protection from potential turmoil or inflation, should rise.
Emerging-market central banks continue to diversify their foreign exchange holdings. And an eventual surge in inflation following widespread money printing can hardly be discounted, notes Roger Bootle of Capital Economics especially if "at some stage governments and central banks... choose [higher inflation] in order to try to escape from the debt burden".
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
