Advertisement

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.

Advertisement - Article continues below

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.

Advertisement
Advertisement

Recommended

Don’t panic about Iran – but don’t sell your gold either
Gold

Don’t panic about Iran – but don’t sell your gold either

Markets have reacted calmly to the tension between the US and Iran. But don’t get too complacent. It’s still a good idea to hold on to some gold as in…
9 Jan 2020
Here’s how gold could rise above $7,000 an ounce
Commodities

Here’s how gold could rise above $7,000 an ounce

That the gold price could hit $7,000 an ounce is a logical and plausible possibility, says Charlie Morris. Here, he explains how it could get there.
30 Dec 2019
Gold is in a bull market – and it could have much further to go
Commodities

Gold is in a bull market – and it could have much further to go

Many investors forget that gold is still the best-performing asset of this century, says Charlie Morris. It could also have much further to go.
27 Dec 2019
All the gold in China: money and power goes east
Economy

All the gold in China: money and power goes east

China has far more gold than official figures suggest – as much as America, in fact. He who owns the gold makes the rules, says Dominic Frisby.
15 Nov 2019

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?
UK Economy

Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?

John Stepek runs his eye over the chancellor's £30bn stimulus package and asks if it's enough to get the economy back on its feet after months of lock…
9 Jul 2020
A first-half home run for investment trusts
Sponsored

A first-half home run for investment trusts

The investment trust sector has seen some extraordinary performance in the first half of this year. Max King looks at what's behind it, and asks: is i…
7 Jul 2020