Bad news boosts the gold price

Market jitters have seen investors push the gold price higher.

Andrew Van Sickle
By
published
in Features

The gold price has bounced by 5% this month, marking the second time in a year that the $1,200-an-ounce level has provided support, as the markets have suffered a scare over global growth prospects. The jitters spurred the biggest rush into US gold exchange-traded funds (ETFs) since July.

Falling real (after-inflation) interest rates, a result of falling bond yields, have also helped the higher real rates are, the less appealing gold is, because it offers no yield. Solid demand for gold bars and jewellery in Asia, notably in the run up to the Diwali festival in India, has also buoyed prices.

So what next? The US recovery remains on track, implying higher interest rates. But this could well be offset by interest rates remaining at near-zero levels for longer and more money printing elsewhere.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

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

Sign up

In addition to more monetary loosening in Japan and Europe, all the money printing done so far could still lead to a surge in inflation over the next few years.

Meanwhile, as emerging Asian consumers and investors get richer, their demand for gold should climb, while emerging-market central banks have also been increasing their gold purchases in recent years. So there is scope for further gains. Capital Economics sees gold reaching $1,300 next year and $1,400 in 2014.

Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

Latest