Hello,

 

Much has been written in recent weeks in relation to Gold, and its surge in recent months to $2,344 per troy ounce (that’s 17.9%% YTD in Euro terms). The surge to all-time highs can be attributed to, but not limited to some broad factors. For example, Central Banks have purchased over 1,000 tonnes of Gold since the outbreak of the war in Ukraine. The People’s Bank of China purchased more than $15bn worth in 2023 alone. Whilst the Russian invasion of Ukraine, in this case, serves as a useful anchor for this analysis, Gold as a geopolitical hedge can often need good timing. For example, Gold hit a record high last Thursday but has fallen since – perhaps a consequence of the market anticipating the Iranian response which materialised over the weekend, rather than reacting to the event itself.

 

There is also a strong narrative in support of Gold as an ‘inflation hedge’; as an asset which will protect your purchasing power as prices rise. Whilst the empirical evidence on this is a bit less compelling, there’s little argument that mitigating the effects of inflation has been to the forefront of investor’s minds recently. Finally, as with most commodities, Gold is priced in US Dollars which can also have a material impact on your returns as a Euro based investors. Given the recent shifts in rate expectations, we’ll return to the effects currency fluctuations in next week’s column.

 

As always, if you wish to discuss anything in further detail, please do get in touch.