By Brad Young, Money team
Gold has been trading at record levels – so we’ve re-upped a post from January about whether it’s a good investment for the average Briton.
First though, an explanation of why gold is up from Ricardo Evangelista, a senior analyst at ActivTrades.
He said: “Concerns surrounding global economic prospects, geopolitical tensions, and shifting expectations towards earlier interest rate cuts have fuelled increased demand for the precious metal, leading to its upward price trajectory.”
So, should you be investing in gold?
Those considering gold should be less interested in this short-term figure, and more in treating gold “like a pension”, Ross Norman, chief executive of Metals Daily, told the Money team.
And there are reasons – ranging from interest rates to coups – why some investors “wouldn’t touch it with a long pole”, according to Russ Mould, investment director at AJ Bell.
‘Don’t bother reading gold in the short term’
These two types of buyers tend to hold the metal for longer periods of time, making gold a “resilient” investment that usually rights itself in the long term, Mr Norman says.
But in the short-term, there are many influences on its value when compared with metals like copper, which are more clearly linked to supply and demand, he says.
Uncertainty caused by geopolitical events is likely to affect gold prices this year, with wars in Ukraine and Gaza and 76 elections taking place across the world prompting nervous investors to stock up on gold.
Cuts to interest rates in the US could drive up the metal’s value, though this depends on when and how fast.
“Don’t bother to try and read gold in the short term – it’s unreadable,” Mr Norman says.
He said if you want to make a fortune or lose one then “go to the casino, go and buy bitcoin, but I think you buy gold with a different motivation in mind… you want to secure what you’ve got”.
Predicting gold prices over the long term is much simpler because the fundamental rules of supply and demand become much more relevant, said Mr Norma.
This includes mining (supply) and the size of middle-classes in various nations (demand).
Pros and cons
“UK investors typically have homes as their go-to store of value. It’s a cultural thing, and yet gold has massively out-performed housing on almost every front,” Mr Norman says.
For those who can afford a second home, he says, gold offers an alternative that doesn’t incur the same taxes, stamp duty or agents’ fees – and doesn’t take months to sell.
Mr Mould, of investment platform AJ Bell, says gold is “seen as a haven” from central bank and government policy, but there are reasons some investors won’t touch it.
Gold produces no yield or cashflow – you can’t earn interest on the metal like money in a bank, he says.
Mining companies are also “volatile”, often difficult to manage and don’t always meet expectations. They are subject to taxes, geological problems, nationalisation and even coups, he explains.
The material is also primarily a hedge against things going wrong, and if economies are starting to get a handle on inflation – and cut rates at the right pace so as not to drive them up again – the incentive to buy gold drops.
But at the same time, lower interest rates mean your banked cash isn’t working for you as hard, reducing the opportunity cost of buying gold, he says.
