Investors have gold fever and the yellow metal is soaring. Gold hit £1,107 this morning, a height unseen since October 2012. So, what is the reason for the sudden rise in the gold price, and most importantly, will it continue?
The gold price has risen quite dramatically over the past few weeks, and the reason for this boost comes down to one thing: gold is often considered a safe haven in times of political and economic uncertainty.
Last week, the US Federal Reserve signalled that they may be cutting interest rates due to mounting risks to the economy due to global trade tensions and slowing inflation. This is most attractive to gold investors as, of course, gold does not yield interest, and therefore boosts its appeal.
Conflict in the Middle East may have also had an impact and it reached new heights last week, when Iran shot down a USA surveillance drone, accusing them of spying over Iranian airspace. However, the USA suggested that the drone was in international airspace and also accused Iran of attacking oil tankers in the Persian Gulf.
Russia and China have both increased their gold holdings, and uncertainties about the ongoing USA-China trade war have also helped to enhance the gold price.
Here in the UK, the Tory leadership race, and the decision over who will succeed Theresa May as Prime Minister, as well as the ongoing drama surrounding (yes, you guessed it - ) Brexit, will all add to the economic uncertainty in the world at the moment.
Will the Rise Continue?
For gold to continue its trend upwards, we would need to see sustained uncertainty and risk.
All eyes will be on the G20 summit in Japan in the coming week, as the leaders of the world’s top economies meet. US President Trump is due to meet with the Chinese President Xi Jinping, with hopes that the meeting will end with a cease-fire and trade talks may resume. A trade deal between the two countries could possibly change things for gold.
We should also keep our eyes on the tensions between the US and Iran, for as we know, Trump’s trigger finger can sometimes be a little twitchy (or at least it appears so on his Twitter account).
It seems to be great news for gold right now, but will this current high be lost or beaten? As always, we don’t have that magic crystal ball so we cannot say for sure where gold will go. Could global political uncertainty keep steering investors’ attention towards precious metals?
We can only but keep one eye on the news, and the other on the gold price.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.