Gold back in the ascendant

Gold has jumped by almost 30% since early January, and is back to two-year highs around $1,350 an ounce.

807-Gold-1200

Gold has jumped by almost 30% since early January, and is back to two-year highs around $1,350 an ounce. Overall demand for gold rose by 18% year-on-year in the first half, according to the World Gold Council. Investors' appetite for gold more than doubled. No wonder, then, that precious-metal funds accounted for all ten best-performing funds in Europe and the US in the first seven months of 2016, according to fund-research firm Morningstar.

One key reason for gold's ascent is the weak US data of recent months, which has made the next interest-rate hike an ever more distant prospect. As gold has no yield, a low-interest-rate environment bolsters its relative appeal. More broadly, people appear to be getting increasingly worried about where this central bank activism will lead. Not only has all the money printing failed to engender a strong and sustainable economic recovery, but central banks have blown up huge bubbles in asset markets and just keep pumping in air.

"The current path of monetary and credit expansion is unsustainable" that will eventually come to an end, says Diego Parilla in the Financial Times. This is "extremely bullish" for gold. Meanwhile, investors are mostly concerned about the risk of deflation and stagnation, which means that a return of inflation would come as a nasty surprise, triggering demand for a traditional store of value. The tight US labour market and the fall in the pound suggest that the US and the UK will be the source of concern over rising prices in the next few months.

Recommended

Demand for gold surges after SVB’s collapse
Gold

Demand for gold surges after SVB’s collapse

The demand for physical gold has jumped as investors look to protect themselves from the fallout of SVB’s demise.
14 Mar 2023
5 of the best gold ETFs
Gold

5 of the best gold ETFs

Some investors like to hold gold as an insurance policy against uncertainty, but buying the physical metal can be tricky. Here are the best gold ETFs …
13 Mar 2023
Millennial investors push up demand for physical gold
Gold

Millennial investors push up demand for physical gold

The Royal Mint has seen the demand for precious metals and gold jump 200% as young investors turn to the yellow metal as an alternative to other asset…
8 Mar 2023
6 funds to buy with the gold price near an all-time high
Gold

6 funds to buy with the gold price near an all-time high

The gold price in sterling is trading near an all-time high. Rupert Hargreaves looks at six ways to invest in the yellow metal ahead of further gains.
15 Feb 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023