Posted inAnalysis

ANALYSIS: Go for gold amid political chaos and reinflation

Other than a sharp dip in March – now reversed – the precious metal has been on a roll this year, gaining 8.7% to reach $1,249.7 per ounce yesterday (April 10) afternoon.

Investors may be inspired by the fact prices remain below their peak at $1,360.1 per ounce that were seen last July, driven in large part by Brexit bearishness.

Today’s level is also a far cry from the price of $1,826 seen as the financial crisis and central bank easing dominated minds in 2011.

Gold is a relatively unique investment in that it delivers no yield.

The metal is increasingly used in engineering thanks to its high conductivity, but aside from that its only real-world application is as a decorative object.

Its most important quality for investors is that it can be a diversifier.

Gold can provide a port in a storm as global investors flee risk markets like equities and bonds. Its price changes tend to be less correlated with those seen on capital markets, and it can provide a hedge against bad news.

The evidence suggests wealth managers’ weightings to gold have tended to rise in recent months, with ETF Securities reporting gold ETF inflows of $41.9m last week alone, trouncing all of its other product sectors.

BlackRock’s ETF colossus iShares put global gold ETP inflows at $160m in the week ending 31 March, following a period of generally positive flows since the start of 2016.

 

Part of the Bonhill Group.