“There’s a new gold rush,” says Paul La Monica in Barron’s. Not in California, but “on Wall Street”.
The yellow metal has climbed a fifth this year and recently gold hit a new record high in dollar terms. It has eased back from August's record of $2,531.70 an ounce (oz) to trade at around $2,475/oz (£1,886/oz).
How are US rate cuts helping gold?
Gold’s latest spurt came as the Federal Reserve chair Jerome Powell signalled interest rate cuts ahead. US rate cuts help gold in two ways. Firstly, gold is normally priced in dollars. Lower interest rates tend to weaken the greenback, meaning that more dollars are required to buy an ounce of gold than before. Secondly, interest-rate cuts reduce the yields available on bonds, which are gold’s main competitor as a safe-haven asset, says Étienne Goetz in Les Echos. With less competition, the yellow metal is able to shine.
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
The “surge” in gold prices has been underpinned by “phenomenal appetite” from central banks – especially in countries not aligned with the US. Monetary authorities have bought more than 1,000 tonnes of gold each year for the past two years, a level of buying not seen in five decades.
What's driving the demand for gold?
Gold has no counterparty, making it “the anti-currency” and anti-banking asset of choice, Keith Weiner of Monetary Metals told Aly Yale for CBS.
When people “lose confidence in the stability of their national currencies, they turn to gold as a hedge”. Demand is being driven by deep anxieties about “debt levels, abuse of monetary policy, and either fear or desire for de-dollarisation.” With a contentious presidential election coming up, there is plenty of fear to go around. Analysts tip the metal to reach anywhere from $2,600 to $3,000 an ounce over the coming months.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Read more
-
Millions at risk of 'unnecessary' tax bill – how to shield your savingsMillions of Brits could be taxed on their savings interest this year as their savings interest exceeds the personal savings allowance. Are you at risk?
-
Savers will have to wait as long as 48 years to build a £1m cash ISA pot if allowance is cutChancellor Rachel Reeves is rumoured to be planning a cut to the cash ISA allowance in the Autumn Budget, making it harder for savers to build wealth. Will you still be able to build a £1 million cash ISA pot?
-
Chen Zhi: the kingpin of a global conspiracyChen Zhi appeared to be a business prodigy investing in everything from real estate to airlines. Prosecutors allege he is the head of something more sinister
-
Canada will be a winner in this new era of deglobalisation and populismGreg Eckel, portfolio manager at Canadian General Investments, selects three Canadian stocks
-
Jim O’Neill on nearly 25 years of the BRICSJim O’Neill, who coined the acronym BRICS in 2001, tells MoneyWeek how the group is progressing
-
Circle sets a new gold standard for cryptocurrenciesCryptocurrencies have existed in a kind of financial Wild West. No longer – they are entering the mainstream, and US-listed Circle is ideally placed to benefit
-
8 of the best converted industrial properties for saleThe best converted industrial properties for sale – from a Victorian railway station in Norfolk to a Grade II-listed former water tower with views of the River Alde
-
More clouds gather over renewable energy trusts – is there any hope for the sector?The outlook for renewable energy trusts has gone from bad to worse this year, with the industry being caught in a 'perfect storm'
-
Should ISA investors be forced to hold UK shares?The UK government would like ISA investors to hold more UK stocks – but many of us are already overexposed
-
Why Scotland's proposed government bonds are a terrible investmentOpinion Politicians in Scotland pushing for “kilts” think it will strengthen the case for independence and boost financial credibility. It's more likely to backfire
