Gold regains its shine

published 19 December 2014

Gold has bounced from four-year lows as stockmarkets have swooned, boosting demand for an asset that historically does well when other assets fall. Fears that the eurozone crisis is flaring up again have also been bullish for gold. Can it build on the latest jump?

The fundamentals look tricky. The US dollar is strengthening as investors price in rising interest rates. Higher rates, plus an ongoing economic recovery, suggests things are getting back to normal not good news for an asset that thrives on bad news.

But over the longer run, there seems scope for further gains. Demand in emerging markets is solid, with developing world central banks continuing to buy.

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Russia added to its stash for a seventh straight month in October and now has the fifth-biggest gold holding of any central bank. Emerging market consumers should show more interest in gold as jewellery and an inflation hedge as incomes grow.

All the money printing of recent years could yet lead to a surge in inflation, and another financial crisis would badly dent confidence in paper money. "Bottom line, gold is money," as Peter Boockvar of The Lindsey Group summed it up. Particularly "in a world where fiat currencies are being created to an extent the world [has] never seen".

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.