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.

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."

Recommended

Gold will soon regain its shine
Gold

Gold will soon regain its shine

With the gold price down by 9.5% in the first quarter of 2021, it has been a rotten start to the year for gold.
9 Apr 2021
Why gold has been such a bad investment so far this year
Gold

Why gold has been such a bad investment so far this year

Gold – the ultimate safe haven investment – is proving anything but safe. It’s lost over $200 an ounce since its high at the start of the year. Domini…
3 Mar 2021
Gold will soon regain its lustre
Gold

Gold will soon regain its lustre

Despite roaring commodity prices and central bankers stoking inflation, gold is being left behind. But that won't last.
26 Feb 2021
Gold has had a tough start to 2021, but we’ve been here before
Gold

Gold has had a tough start to 2021, but we’ve been here before

Gold has had a disappointing start to the year – in an increasingly digital world, it’s the ultimate analogue asset. Nevertheless, says Dominic Frisby…
20 Jan 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
What does the Coinbase listing mean for bitcoin and other cryptocurrencies?
Bitcoin

What does the Coinbase listing mean for bitcoin and other cryptocurrencies?

As the bitcoin price hit new highs, the world's biggest cryptocurrency exchange, Coinbase, listed on the stockmarket. John Stepek looks at what that m…
15 Apr 2021
Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021