Will the gold price continue to struggle?
The 12-year bull-run in gold looks set to end this year. But the longer term is less certain.
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".
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Inflation forecast: where are prices heading next?
Updated inflation forecasts were published alongside Rachel Reeves’s Autumn Budget on 30 October. How quickly will prices rise over the next few years?
By Katie Williams Published
-
Ryanair profits dive as passengers hold out for lower fares – should you invest in airline stocks?
Europe’s largest low-cost airline said on Monday that net profits had fallen by 19% to €1.79 billion for the six months to the end of September
By Chris Newlands Published