Gold (GC=F) prices continue to hit new highs this week amid escalating geopolitical tensions and a US interest rate cut cycle.
The precious metal topped 2,000 pounds per ounce for the first time in the UK on Thursday morning. Paul Atkinson, managing director at Atkinson’s Bullion & Coins, said this was due to “a combination of higher US dollar gold prices and stronger sterling against the dollar”, with cable rates at midday on Thursday. It is trading at $1.3381.
Gold is primarily traded in US dollars, so currency depreciation can make the precious metal cheaper for buyers.
Spot gold prices were trading at an all-time high of nearly $2,677 as of midday Thursday, while gold futures prices had soared to $2,698. The spot price refers to the current market price of gold, while futures contracts indicate the agreed upon price at which the precious metal will be bought or sold in the future.
The recent surge in gold prices comes after US consumer confidence data released on Wednesday showed the biggest decline in three years, further increasing market expectations for further interest rate cuts.
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There are also concerns about stubborn inflation in the world’s major economies. U.S. inflation fell to 2.5% in August, but still above the central bank’s target of 2%.
Russ Mould, investment director at AJ Bell, said another factor influencing gold prices is the “increasing mountain of sovereign debt in the West and the lack of any discussion about this in the US.” “The situation remains markedly nervous,” he said.
The US national debt exceeds $35 trillion, with a debt-to-GDP ratio of 120%.
He added, “The deficit accumulation policies advocated by both candidates in the race for the White House will also have an impact on investor sentiment.”
“The demand for gold is increasing as tensions in the Middle East increase,” with Israel’s attack on Lebanon’s Hezbollah, Mold said.
Gold is considered a safe asset against inflation, economic uncertainty, and market fluctuations because it acts as a reliable store of value that can appreciate even in times of turmoil.
Some analysts believe that given this demand growth, gold prices could reach $3,000 next year.
how to invest in gold
The most obvious way to invest in precious metals is to buy physical gold.
But for most investors, “owning gold bars is simply not practical. Gold bars need to be safely transported, stored, and insured, all of which are costly. It’s a hassle,” said Victoria Hassler, head of funds research at Hargaves Lansdown.
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Alternatively, another option is to purchase exchange-traded products that aim to track the performance of these types of assets and can be bought and sold in the same way as stocks.
One example that Hassler highlighted is the iShares Physical Gold ETC (IGLN.L), which tracks spot gold prices.
“While it is backed by physical gold, it eliminates the hassle of transporting, storing and insuring gold, allowing investors to buy and sell whenever they want,” she says.
Another way to invest is to buy shares in gold mining companies.
“There is often a lag between rising gold prices and rising gold miners’ stock prices, but over the long term, as gold prices rise, gold miners should perform better,” Hassler said. This is due to the fact that the cost of mining gold remains the same, but miners can sell it for a higher price.
For most investors, owning gold bars is not practical, so another option is to buy a commodity traded on an exchange. (From Reuters/Reuters)
Gold Fund Top Picks
While investing directly in these companies is an option, many investors will be better served investing through a fund that provides diversified exposure to many different gold miners, Hassler said. says.
One such fund is Ninety One Global Gold (0P00009NF8.L), run by George Cheverley. The fund primarily invests in companies involved in gold mining around the world, but also has some exposure to silver.
“About 50% of the fund is invested in Canada, which is home to nearly half of the world’s publicly traded mining and mineral exploration companies,” Hassler said. “We think such funds could benefit if gold demand and gold prices remain strong.”
Top holdings include Canadian mining companies Barrick Gold (GOLD) and Agnico Eagle Mines Limited (AEM).
The fund is up 23% over the past year, lagging the 30% rise in its benchmark NYSE Arca Gold Miners Total Return Index. However, the fund has outperformed over the last month, gaining 3% against a flat benchmark.
The BlackRock Gold & General (0P0001M07N.L) fund is also a “scavenger hunt,” said Jonathan Moyes, Wealth Club’s head of investment research and head of portfolio services.
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The fund is managed by Evi Hambro and Tom Hall, who have managed the strategy since 2009 and 2015 respectively.
“The fund invests in companies that move the planet, not physical gold, so company prices and spot gold prices do not necessarily correlate,” Moyes said. “These miners mine and sell physical assets, which means their wealth can fluctuate depending on the price of gold and input costs at the time of sale.”
Barrick Gold and Agnico Eagle Mines Limited are also held in the fund, along with US mining company Newmont Corporation (NEM).
“In addition to benefiting from rising gold prices, this fund can also benefit from generous dividends paid by the underlying assets, providing investors with income not available with physical gold.” added Moyes.
The fund has returned 23% year-to-date, slightly outpacing the 22% rise in the benchmark FTSE Gold Mining Index.
But Moyes said investors should note that this strategy is “much more volatile” than the spot gold price over the long term.
Moyes said the Jupiter Gold & Silver (0P00017J9E.L) fund, managed by Ned Naylor Leyland, Chris Mahoney and Joe Lunn, “wanted to go a step further and expand its exposure to precious metals. He emphasized that it is one of the funds for “investors”.
In addition to investing in gold and silver producers, developers and explorers, the fund has direct exposure to these precious metals through ETC.
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“This diversified approach ensures that investors are not concentrated in just one metal basket,” Moise said. “Exposure to physical bullion has an equity kicker that provides potential additional returns above spot market prices, while ensuring a certain level of correlation with precious metal prices.”
Top holdings include the Sprott Physical Silver (PSLV) Trust and the Sprott Physical Gold (PHYS) Trust.
The fund has generated a 24% return since the beginning of the year, only slightly below the benchmark’s 25% gain.
For investors who don’t want to invest entirely in gold but are looking for a fund with some exposure, AJ Bell highlights Personal Asset Trust (PNL.L).
Paul Angell, head of investment research at AJ Bell, said the investment trust, managed by Sebastian Ryan, was “very focused on capital preservation”.
“Managers tend to invest in traditional asset classes (equities, government bonds, gold) and are sensitive to market opportunities with an emphasis on these core asset classes,” he says.
At the end of August, the trust’s holdings were 12% allocated to gold bullion. The firm’s investment team says gold has accounted for 2% of the fund’s performance since the start of the year, with the stock up 4% by 2024.
The share price has risen nearly 6% in a year, outpacing the 3% rise in the UK retail price index.
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