Advertisement

Gold will regain its shine

The dash for gold suggests that investors see rising risks in markets and are seeking out an asset traditionally seen as the ultimate safe haven.

"The gold bugs are out in force," says Garry White in The Daily Telegraph. The dash for this "financial teddy bear" suggests that investors see rising risks in markets and are seeking out an asset traditionally seen as the ultimate safe haven. Soft Chinese data and rising tensions in the Middle East have sent gold prices towards 14-month highs around $1,340 an ounce.

Advertisement - Article continues below

The main drawback of holding gold is that it pays no interest, but with government bond yields continuing to plumb the depths, reflecting fears over global growth, gold is looking more attractive on a relative basis. Interest-rate cuts by the Federal Reserve would also help gold by weakening the dollar. They would make the currency less appealing and gold more attractive since it is priced in dollars.

Then there's inflation. MoneyWeek has been pointing out for some time that markets may be underestimating the risks of an inflationary scare in an era of ultra-loose monetary policy. Peter Schiff of Euro Pacific Capital tells Barron's that if the economy slides into a "severe recession" then we could be in for another round of quantitative easing that is "much larger than prior ones". That will stoke fears of inflation too. "Gold does well in periods of dollar weakness, inflation, and economic uncertainty," concludes Schiff. "We are about to get all three."

Advertisement
Advertisement

Recommended

Commodities look cheap
Commodities

Commodities look cheap

Gold may be on a bull run, but industrial commodities, including copper, zinc and aluminium, remain cheap.
17 Jan 2020
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

Most Popular

BP has slashed its dividend – and markets love it
Income investing

BP has slashed its dividend – and markets love it

BP has bowed to the inevitable and cut its dividend in half – and its share price promptly rose. John Stepek explains what it means for shareholders …
4 Aug 2020
Listed companies are dying out, and that could have serious consequences
Stockmarkets

Listed companies are dying out, and that could have serious consequences

Private equity is taking over from public stockmarkets as the biggest provider of capital to companies. That’s bad for investors and bad for society a…
3 Aug 2020
Gold hits the big $2,000 level – are Aim miners about to play catch up?
Gold

Gold hits the big $2,000 level – are Aim miners about to play catch up?

With the price of gold shooting through $2,000 an ounce, the yellow metal looks unstoppable. Things are so bullish, even Aim-listed junior gold miners…
5 Aug 2020