The precious metal has shined as a gloomy global economic outlook – from the UKs Brexit to Chinas slowdown has boosted the fortunes of haven assets. The price of gold has soared this year mainly driven by negative interest rates and financial uncertainty.
Long-term fans predict a sustained bull run, whether they are right depends on central-bank action boosts inflation and this generally has a positive impact for gold. The Federal Reserve also has a part to play, refraining from the sort of interest-rate rises that would boost the U.S. dollar and make it harder for gold to compete with interest-bearing securities.
Commonly Gold is viewed as a hedge against inflation. Analysis from TD Securities shows that gold climbed at an average of 24% annually in periods of high inflation going back to the 1970s.
Joe Foster, fund manager at VanEck Associates believes “This is the beginning of something that will last for years”.
The question is what if inflation doesn’t arrive? We saw in the last bull-run, gold was driven in part by similar expectations of higher inflation that never came. That helped push the price back down from its 2011 record.
For the moment, the gold industry and investors are enjoying the year.