Trending
Written by: Susannah Streeter | Hargreaves Lansdow
- Gold prices reach fresh record levels on Friday morning.
- Spot gold hit an all-time high of $3,079.01 before retreating slightly.
- Gold futures rose 1% to $3,090.30 an ounce and are up more than 8% on the month.
- Safe haven demand amid looming tariffs and geopolitical uncertainty is fuelling demand.
- Gold’s rise has sparked a FOMO effect with UK shoppers rushing to buy jewellery.
Gold has been on another glittering run upwards as investors seek out safe havens for their money. The spike in prices to fresh record levels comes as the world braces for another round of US tariffs, and geopolitical uncertainty swirls. The price of gold has also been helped by buying from central banks, particularly by China. Part of the appeal of gold is as a hedge against inflation, which is staying stubborn in some economies amid concerns US trade policy could push up consumer prices further. There are also ongoing concerns that governments across the world have piled up high levels of debt, which is associated with a rise in long-term inflationary expectations. Gold’s rise has sparked a FOMO effect among individual buyers, with a spike in demand for jewellery showing up in the latest UK retail sales figures.
While further steps towards a ceasefire in Ukraine could see prices ease off, violence continues in the Middle East. There is also a risk that geo-political tensions escalate as opportunities in the Arctic are eyed by the US and Russia. If there are any indications that China may be poised to become more aggressive against Taiwan, there could be to be a further pull towards the precious metal.
However, historically over the very long term, the gold price has matched inflation. That puts the long-term expected return close to the return you would get on cash - so well below a return you might expect from equities. Investors considering investing in gold should do so as part of a diversified portfolio and they shouldn’t put all their eggs in a golden basket. It’s still important that you invest in other assets like bonds and shares, given that gold offers no return, like dividends or interest. It can perform well in environments when both equities and bonds suffer, most obviously during times of crisis or heightened geopolitical tension.
Short term speculating can backfire even though there will be a temptation to hang onto the coattails of the record run upwards. As we’ve seen historically, the metal can dip sharply if geopolitical tensions ease. Gold shot up after the terror attacks of 9/11, then lost significant ground in the years that followed. Gold should be viewed as a hedge against potential falls in other asset classes like bonds or stocks. Given that US stock markets had reached record levels before recent losses, and there is concern about a further correction, gold could be considered a sensible medium-term hold as part of a diversified portfolio.