Gold dips – but don’t give up on it
The gold price has tumbled by more than 10% this year, slipping from a peak of around $1,360 per troy ounce in January to $1,217 last month.
Has gold lost its function as a safe haven in times of crisis? Many investors may be asking themselves this question. Given concern over another potential euro crisis, some central banks' ongoing quantitative easing or money printing as well as the threat of a potential global trade war, you would have thought there were plenty of reasons to buy gold. Nevertheless, the gold price has tumbled by more than 10% this year, slipping from a peak of around $1,360 per troy ounce in January to $1,217 last month.
Don't expect prices to recover anytime soon, says Simon Constable in Barron's The strength of the dollar is likely to keep a lid on any rally. The inverse relationship between gold and the dollar index is a recurrent feature of the gold market. A stronger US currency makes gold more expensive to investors holding other major currencies.
The crucial factor, however, is the outlook for real, or inflation-adjusted, interest rates, especially in the world's biggest economy. The strong recent data has more than offset jitters over a trade war and points towards further rate hikes. That makes gold less appealing because it offers no yield. Bear in mind, however, that inflation could soon gather strength (see page 14), so gold may regain its shine.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
A surge in inflation in turn implies unexpectedly quick rate hikes and swooning markets always good news for a metal that thrives on bad news.
Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.
She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..
-
Barclays warns of significant rise in social media investment scams
Investment scam victims are losing an average £14k, with 61% of those falling for one over social media. Here's how to spot one and keep your money safe
By Oojal Dhanjal Published
-
Over a thousand savings accounts now offer inflation-busting rates – how long will they stick around?
The rate of UK inflation slowed again in March, boosting the opportunity for savers to earn real returns on cash in the bank. But you will need to act fast to secure the best deals.
By Katie Williams Published