Gold Loses Shine For Investors

Gold has not proved to be the glittering investment most people would expect so far this year.

Although the price was up 4% in the first four months of the year, the gains were wiped out by June, says trade body the World Gold Council.

The group blames three factors for the stagnation of gold prices:

  • The strengthening US dollar
  • Investors unwilling to take risks
  • Soft demand

But the council, which represents miners, processors and retailers, says the market is going into the second half of the year with more optimism.

Negative effect

Economists at the council say the gold price has historically improved in times of high inflation and when the US dollar has weakened.

They expect the trade tariff war with China to have a negative effect on the US economy and the value of the dollar that will reflect in a rising price for gold.

The council also argues that gold prices tend to rebound in September as investors rebalance portfolios before the year end and consumers buy gold for their festive seasons.

During 2018, the price per ounce of gold has fluctuated between £934.60 and £981.11. The current price is £938.83, according to UK dealer Bullion By Post.

The price peaked in January at £978.75 and dropped away over the next four months, hitting a low of £934.59 before recovering to £971.60 in June.  Since then, the price has gradually slipped to the current trading price.

Soft start to year

“Gold demand had a soft start to the year, hitting the lowest first quarter figure since 2008 largely due to a fall in investment demand for gold bars and gold-backed exchange traded funds, as a subdued gold price hampered demand,” said a council spokesman.

Alistair Hewitt, head of market intelligence at the World Gold Council, added: “Relatively solid global economic growth, coupled with the return of volatility in the capital markets in February, created a stable environment for gold in Q1 – while equity markets around the world came under pressure, the gold price rose.

“Although demand was down year-on-year, we saw encouraging levels of jewellery demand in China, the US and Europe, continued growth in the technology sector, and steady inflows into ETFs, albeit at a slower pace than last year.”

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