Gold has recovered its mojo

Woman cleaning a picture of a gold sovereign — The Royal Mint says sales tripled in the first half of 2020

(Image credit: © Matthew Horwood/Getty Images)

At times of uncertainty, gold is an investor’s “weapon of choice”, says Myra Saefong for MarketWatch. The yellow metal has been on an impressive run this year, breaking through the $1,800 an ounce level last week to hit a nine-year high. In sterling terms gold has long surpassed its 2011 peaks. At £1,436/oz, it is up by 25% in a year.

The Royal Mint’s precious metals division says that sales tripled during the first half, says Shane Hickey in The Observer. Trading apps are helping bring a new generation into the precious metals market: 25-34-year-olds are the “fastest growing demographic”, says the Royal Mint’s Andrew Dickey. It is the monetary backdrop that largely explains the gold surge, Ross Norman of Metals Daily told Saefong. The waves of stimulus unleashed by the Federal Reserve and other central banks to fight the pandemic have sparked renewed concerns that inflation will return and that bond yields could plunge even further south. The result is that gold “seems to have recovered its mojo”.

The yellow metal’s most significant drawback is that it pays no interest, but at a time of near-zero interest rates and negative (or near-negative) government bond yields, not many other safe assets do either. That increases the attractions of one of the oldest stores of wealth. Record low interest rates are not going away, David Coombs of Rathbones tells Jeff Prestridge in The Mail on Sunday, so the rally should have further to go.

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How much further? Goldman Sachs thinks the metal will hit $2,000/oz over the next 12 months, reports Callum Keown in Barron’s. With the US engulfed in another wave of the virus it will fall to Chinese investors – the world’s largest retail buyers – to drive the rally higher. The present climate is proving “ideal for gold”.

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.