As gold price continues to rise, has the precious metal started to lose its shine?

Gold has sparkled this year as nervous investors have flocked to the “safe haven” asset. But as the price hits a nine-year high, experts are questioning whether it is now too expensive to buy.

The gold price this week passed $1,800 (£1,434) per ounce, a level not seen since 2011. The sharp rise has prompted more and more investors to seek a piece of the action.

The amount of money put into gold exchange-traded funds – used by both fund managers and DIY investors – has been consistently rising this year. However, while savers are still rushing in, professional buyers have cooled their interest.

The futures market measures the number of professional investors such as hedge funds, traders and banks that invest in gold. Investors take out a “long” position if they think the price will rise and a “short” position if it is more likely to fall.

Data from the Commodities Futures Trading Commission, the American regulator, showed that optimism for gold was at its peak earlier this year, when there was around $40bn more invested in long positions than shorts.

This difference has almost halved since, as the gold price has increased.

Peter Sleep of Seven Investment Management said governments had also been buying the metal, which has helped to increase its price.

“China, Russia and Turkey have been buying gold as they are not on the best of terms with America and want to hold their reserves in something other than the dollar,” he said.

However, he warned that these countries might have less cash to buy gold if the global slowdown in trade due to the coronavirus crisis continued. If they stop buying or start selling, the price could come down, affecting those who bought more recently. Mr Sleep added that anyone interested in gold ETFs should consider bond ETFs instead. “These can be volatile, like gold, but at least provide an income,” he said.

Others are more bullish. Charles Gibson of Edison Investment Research said the monetary policy of the Federal Reserve, America’s central bank, should boost the gold price over the long term. Interest rates are low and unlikely to rise any time soon. Low interest rates act as a boost to the gold price as investors who switch from cash to the precious metal forego less interest.

Some money previously in bonds will also get moved to gold, analysts said. Central banks have restarted bond-buying programmes and the presence of a large buyer in the bond market raises their value and reduces their yield.

“With unlimited bond buying, the sky is the limit for gold,” Mr Gibson said. Alexander Hacking of Citi, the bank, agreed. He said central bank policies were positive for gold. “Virtually nobody seems bearish on gold,” he added. He said the price could reach $2,000 an ounce by the end of next year, an 11pc rise on its current level.