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Gold price – are there more increases to come?

Monday, September 5, 2016

Gold has been one of the very best performing investments this year, with the eight best performing funds of 2016 all gold funds.

Poor global growth, concerns about the Chinese slowdown, Brexit and the forthcoming US Presidential elections have all pushed savvy investors towards the precious metal, resulting in a strong price for most of this year.

But is the gold rally sustainable? Some investors may now be looking to sell to cream off profits at the top of the mark, but there could still be further rises in the price of gold. Much depends on outside influences and how the markets react to them.

Michelle McGrade of TD Direct Investing told the Daily Telegraph: “The price is up by 16 per cent over 12 months and so some profit taking could be a clever thing to do.”

However, Nick Peters, a portfolio manager with Fidelity, believes gold will continue to have an important part to play in investors’ portfolios.

He said: “Although we have seen a significant rally in gold, I think investors should still consider an allocation to the precious metal.

“Gold can function as a safe haven during times of market volatility and provide strong countervailing returns to shares.”

It is this safe haven aspect that has appealed so much to investors during 2016. With volatility in stock markets and world events, the precious metal has again shown its traditional worth as safe place to store money. Although there are not the potential high returns from gold that other more risky investments can offer, gold does not tend to lose its value in the same way.

Mr Peters added: “Gold has benefited just as much from an easing in headwinds as any support from jittery investors. With yields [on other assets] expected to remain lower for longer, the traditional drawback of gold, that it yields nothing, is less of an issue.”

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