It has been a dispiriting year so far for gold investors, but the yellow metal could be poised to glitter again. Gold prices started the year around $1,900/oz but fell back as investors piled into “risk-on” assets in anticipation of economic reopening. This year’s cryptocurrency mania has also stolen some of gold’s thunder as a hedge against currency debasement by central banks. By early March, the price had tumbled to $1,700/oz. June was the metal’s worst month since 2016. Yet gold has perked up to trade around $1,820/oz this week. It has risen by 2.5% since the start of July in dollar terms.
Why? Because of gold’s traditional role as an inflation hedge. Inflation surged to 5.4% last month in the US and also went over the central bank’s target in the UK. Unlike the dollar, gold is “a currency that cannot be manipulated by central banks”, Catherine Doyle of Newton Investment Management told Sam Benstead in The Daily Telegraph. Mikhail Sprogis of Goldman Sachs thinks that gold “should be worth at least $2,000 today” given the inflationary outlook. The bank is advising clients to “snap up the precious metal”, says Benstead.
Gold hit an all-time high of $2,063/oz last year, but it has since lost 10%. Long term buyers won’t be too put out though. Investors who bought five years ago are still sitting on a 37% gain; 20 years ago, gold was trading below $300/oz.
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
-
Defeat into victory: the key to Simon Wolfson's successOpinion Next CEO Simon Wolfson claims he owes his success to a book on military strategy in World War II. What lessons does it hold, and how did he apply them to Next?
-
Aircraft leasing companies can lift investors' portfoliosThe aircraft leasing business is a safer way to cash in on air travel and its booming demand. David Prosser explains how it works and how to access it
-
Defeat into victory: the key to Next CEO Simon Wolfson's success
Opinion Next CEO Simon Wolfson claims he owes his success to a book on military strategy in World War II. What lessons does it hold, and how did he apply them to Next?
-
Aircraft leasing companies can lift investors' portfolios
The aircraft leasing business is a safer way to cash in on air travel and its booming demand. David Prosser explains how it works and how to access it
-
8 of the best houses for sale with fishing rightsThe best houses for sale with fishing rights – from a Georgian property on the banks of the River Derwent, County Durham, to a restored mill house in Marlborough with fishing rights on the River Kennet
-
How to find value in Asian small cap stocksThree competing Asian investment trusts all have good records, but this one is the obvious choice at present, says Max King
-
How dinosaur fossils became collectables for the mega-richDinosaur fossils are prized like blue-chip artworks and are even accelerating past the prices of many Old Masters paintings, says Chris Carter
-
The battle of the bond markets and public financesAn obsessive focus on short-term fiscal prudence is likely to create even greater risks in a few years, says Cris Sholto Heaton
-
STS Global Income & Growth: Buying quality at a discountInvestors should consider STS Global Income & Growth to diversify away from mega-cap tech
-
'We still live in Alan Greenspan’s shadow'When MoneyWeek launched 25 years ago, Alan Greenspan was chairman of the Federal Reserve. We’re still living with the consequences of the whirlwind he sowed
