Interactive Investor

Gold hits record high as investors continue hunt for havens

3rd August 2020 15:00

Laura Miller from interactive investor

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Precious metal prices are booming for many reasons, and investors prefer them to bonds and cash.

Gold prices soared to an all-time high of almost $2,000 today as worried investors look for safe havens for their money.

The price of the precious metal is up 30% from its March lows. Analysts at private bank UBP say this is part of an extended bull market for gold and the price per ounce could reach $2,100.

The price of the precious metal is rising towards the landmark $2,000 point for several reasons. 

Economic stimulus has pushed down already low savings interest rates and government bond yields, making gold more attractive. 

Central banks around the world have also been buying gold in large amounts.

Investments in the metal does not pay interest, so returns will be unharmed by lower rates.

Tensions between the United States and China have also worried investors and so boosted the gold price.

Gold is a traditional safe haven for investors during times of turmoil in stock markets, which have been extremely volatile in the last six months.

It is also hard to quickly create more of the metal, making its price less volatile, another appeal to investors.

Norman Villamin, chief investment officer of wealth management at UBP, says:

“The war against Covid-19 means fiscal deficits and negative real interest rates. Even with a vaccine, governments will need fiscal measures to reshape their economies, which will provide a catalyst to the bull markets for gold and silver.”

Analysis by Bank of America last week found $3.9 billion (£3 billion) of investors’ money went into gold, the second largest weekly flow of all time. This compared to $17.2 billion into bonds, $5.6 billion into cash and $1.9 billion out of equities.

Gold does not pay an income, but investors are still picking the metal over bonds.

Finding bonds that actually pay a return has become almost impossible, with many paying negative real returns.

Last week top-performing FTSE 100 stock Polymetal International (LSE:POLY) saw further boardroom buying of its shares after the miner's fortunes were boosted by rising gold prices.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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