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
-
Energy, healthcare and utilities: how to tap into AI in the real economyAI promises to add to the productivity and profitability of much of the economy beyond tech. Here’s two themes to tap into AI in the real economy.
-
How Junior ISAs could help with inheritance tax planningLooming inheritance tax changes will limit how much pension wealth can be passed on but more people may be maxing out their loved ones’ JISA allowance instead
-
Should you sell your Affirm stock?Affirm, a buy-now-pay-later lender, is vulnerable to a downturn. Investors are losing their enthusiasm, says Matthew Partridge
-
Why it might be time to switch your pension strategyYour pension strategy may need tweaking – with many pension experts now arguing that 75 should be the pivotal age in your retirement planning.
-
Beeks – building the infrastructure behind global marketsBeeks Financial Cloud has carved out a lucrative global niche in financial plumbing with smart strategies, says Jamie Ward
-
Saba Capital: the hedge fund doing wonders for shareholder democracyActivist hedge fund Saba Capital isn’t popular, but it has ignited a new age of shareholder engagement, says Rupert Hargreaves
-
Silver has seen a record streak – will it continue?Opinion The outlook for silver remains bullish despite recent huge price rises, says ByteTree’s Charlie Morris
-
Investing in space – finding profits at the final frontierGetting into space has never been cheaper thanks to private firms and reusable technology. That has sparked something of a gold rush in related industries, says Matthew Partridge
-
Star fund managers – an investing style that’s out of fashionStar fund managers such as Terry Smith and Nick Train are at the mercy of wider market trends, says Cris Sholto Heaton
-
Affordable Art Fair: The art fair for beginnersChris Carter talks to the Affordable Art Fair’s Hugo Barclay about how to start collecting art, the dos and don’ts, and more
