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.

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".

Recommended

Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Why investors should consider adding Glencore to their portfolios
Share tips

Why investors should consider adding Glencore to their portfolios

Commodities giant Glencore is well placed to capitalise on rising commodity prices and supply chain disruption, says Rupert Hargreaves. Here’s why you…
13 May 2022
How to invest in the multi-decade boom in industrial metals
Industrial metals

How to invest in the multi-decade boom in industrial metals

The price of key industrial metals has already begun to rise. The renewable energy transition will take them higher, says David Stevenson. Here's how …
6 May 2022
Should you buy BP shares? The oil giant looks cheap, but approach with caution
Energy stocks

Should you buy BP shares? The oil giant looks cheap, but approach with caution

With the oil price spiking, BP shares look cheap on a price/earnings ratio of just over seven. But do they deserve a place in your portfolio?
5 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022