Inflation will restore gold’s shine

published 27 November 2020

Is the gold rally over? Gold hit a four-month low around $1,807 an ounce this week. The yellow metal remains up by 53% since August 2018 but is now trading 11% short of its peak this summer. The picture is similar in sterling terms, with gold 13% off its August high on around £1,352/oz. Gold is seen as a traditional safe haven. With positive vaccine news stoking optimism about 2021 investors are now keen to get exposure to the recovery rather than parking their wealth in an asset that pays no interest.

Gold has not behaved much like a safe-haven this year, says Will Horner in The Wall Street Journal. “Rather than moving in the opposite direction to stocks” it has often rallied and fallen together with them. The reason seems to be central bank stimulus. When new money hits the market investors buy stocks to enjoy the resulting asset price inflation, while buying gold as protection in case everything goes horribly wrong. A “6,000-year history as a store of value” makes the metal the ultimate hedge for those concerned about inflation.

MoneyWeek

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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.