Inflation will restore gold’s shine
Gold remains up by 53% since August 2018 but is now trading 11% short of its peak this summer. But if you hold gold, hang on to it.
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.
Goldman Sachs says it sees the risk of inflation as “greater than at any other time since the 1970s”, notes Henry Sanderson in the Financial Times. For those still concerned that a global recovery will leave gold behind, precious metals bulls are moving into silver and platinum, which have industrial uses and could stand to gain even if gold lags.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Zoopla: housing market recovery continuing amid brighter 2024 outlook
The Zoopla House Price Index has found sellers are still accepting five-figure discounts on their properties. But house price inflation is improving.
By Henry Sandercock Published
-
Revealed: the best funds to buy before the end of the tax year
Looking to add more investments to your portfolio but not sure where to start? We reveal the best funds to buy now as the end of the tax year edges closer.
By Katie Williams Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published
-
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published
-
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
-
Magic mushrooms — an investment boom or doom?
Investing in these promising medical developments might see you embark on the trip of a lifetime.
By Bruce Packard Published
-
What pension providers don't tell you about your retirement money
Check the small print from your pension provider or risk losing thousands.
By Merryn Somerset Webb Published
-
Should you invest in sector funds?
Sector funds can be a useful way to fine-tune a portfolio or track a theme, but check what the index holds.
By Cris Sholto Heaton Published