Monday, August 15, 2016
The high demand for gold in the first half of this year has marked the precious metal’s best six-month performance for 36 years.
Gold’s high prices achieved back in 1980 were due to economic uncertainties, much as we’re seeing at the moment following the UK's Brexit vote at the end of June and the forthcoming US presidential election.
However, according to the World Gold Council, this is not the only driver for gold’s 27 per cent rise in the first half of 2016.
The Council’s director of investment research, Juan Carlos Artigas, said that there have been numerous reasons for the strong demand, including moves by investors who had reduced their gold holdings in recent years and have now returned to the precious metal, Investment News reported.
Mr Artigas added: “There is still the issue of macroeconomic uncertainty, but we are also dealing with a US dollar that is less strong than it has been recently.”
Analysts also pointed to the actions of central banks around the world as helping to boost investors’ interest in gold.
Mohamed El-Erian, chief economic adviser at Allianz SE, said: “While some may see gold as a hedge for the possibility of high inflation, the main driver of investor appetite at this stage is concern about the overvaluation of other financial assets, particularly stocks and bonds whose prices have been artificially lifted by central bank actions.”
Gold is traditionally considered a safe have investment in unsettled economic times and as a hedge against inflation. Many investment advisors see holdings in gold as a crucial part of an investment strategy, alongside stocks and shares to provide a diversified portfolio where risk is spread.
Scot Hanson, from EFS Advisors, for example, advises his clients to have between five per cent and 10 per cent of their total investments in precious metals.