Gold will keep gleaming in 2019

The past few months have been good for gold. And there is scope for further gains.

The past few months have been good for gold. The recent tumble in equity markets, higher volatility and fears of further trouble on the trade front have all prompted investors to seek out a safe haven. While the FTSE All World index has lost 10% since its September peak, gold has gained 7% over the same time period.

There is scope for further gains. If US Federal Reserve chairman Jerome Powell decides to stop raising interest rates, as he indicated he might, "or even go the whole hog and cut them", gold could benefit, says Russ Mould, of platform AJ Bell. Such a policy reversal would reflect a weakening US and global outlook, bolstering gold's appeal as a safe haven.

And because gold has no yield, its relative appeal grows when expectations of rate hikes dwindle. In addition, gold is widely seen as a hedge against inflation. With wages rising even as overall growth is slowing, stagflation could be on the cards, which would be excellent news for gold.

Note too that central banks wanting to diversify their foreign-exchange reserves are expected to buy more gold than last year; they should account for 12% of global demand, reckons Capital Economics. Finally, there is now talk of backing cryptocurrencies with gold, as Carol Lewis points out in The Times. That's another reminder that gold has been a store of value and an alternative currency for centuries, while bitcoin is a fad.

Recommended

The charts that matter: bitcoin rises and a mixed week for tech
Economy

The charts that matter: bitcoin rises and a mixed week for tech

Tech stocks suffered a volatile week. Here’s how it affected the charts that matter most to the global economy.
30 Jul 2021
Oil is taking a well-earned rest. But the bull market isn’t done yet
Oil

Oil is taking a well-earned rest. But the bull market isn’t done yet

The oil price has more than doubled in the last five years. It’s come off the boil recently, but in the longer term, things are still looking good. Do…
28 Jul 2021
Coal is far from dead. What should investors do about it?
Coal

Coal is far from dead. What should investors do about it?

Coal – the world’s dirtiest fuel – has been a pariah asset for a long time. But there's still plenty of demand for it. Saloni Sardana asks whether it'…
26 Jul 2021
The charts that matter: what happened to reflation?
Economy

The charts that matter: what happened to reflation?

Government bond yields turned down this week, while the US stock market hit new highs, as “reflation” trades wilted under the pressure of concerns ove…
24 Jul 2021

Most Popular

Why the UK's 2.5% inflation is a big deal
Inflation

Why the UK's 2.5% inflation is a big deal

After years of inflation being a financial-assets problem, it is now an “ordinary things” problem too, says Merryn Somerset Webb. But central banks st…
16 Jul 2021
The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Cryptocurrency roundup: Twitter founder’s “DeFi” platform
Bitcoin & crypto

Cryptocurrency roundup: Twitter founder’s “DeFi” platform

In crypto this week: regulators are getting worried; Jack Dorsey’s bitcoin DeFi platform; and dogecoin’s co-founder lambasts cryptocurrencies.  Salon…
16 Jul 2021