Making money: what the experts think
Shiny metals
“Precious metals have shone this year,” said The Economist – partly because Brexit-related uncertainty has “increased demand for safe assets”, and partly because “rock-bottom interest rates reduce the opportunity cost of holding an investment that produces no income”. The price of gold has risen by 24% over the past eight months, jumping to more than $1,300/ ounce; and “silver has done better still”, jumping by 35% this year. That leap reflects silver’s industrial uses as well as its appeal as an investment: the metal has benefited from rising smartphone use, especially in China, and from solar-panel installations. Platinum and palladium – both used by carmakers in catalytic converters – have also “been boosted by rising car sales in China and America”.
Gold bounce
Investors have been piling into gold as “an insurance policy against stock market volatility and the threat of inflation”, said James Connington in The Daily Telegraph. The bounce has been so pronounced that “the eight best-performing funds over the past year are now all gold funds”, according to FE Trustnet. Time to take profits? It’s a difficult call because, unlike silver and platinum, gold is entirely “sentiment driven” and doesn’t necessarily correlate to supply and demand. Nick Peters of Fidelity thinks this year’s upward price path may have further to go, in part because yields on other assets are “expected to remain lower for longer”. Despite a “significant rally”, investors “should still consider an allocation”, he argues – not least because gold provides “strong countervailing returns to shares”, which have been looking toppy of late.
Cashing in
Others are less optimistic about gold’s chances. “If interest rates rise – and they will – then gold will fall,” said Charlie Morris of News-cape Capital. “Only higher inflation will save it.” The opportunities for major gains are therefore “slim”, though Morris thinks the price “ought to stay above the previous low of $1,050”. Well, maybe, said Michelle Mcgrade of fund shop TD Direct Investing. But why take the risk – particularly given the complexity of the numerous factors that affect the gold price. If you’ve made a tidy nugget this year holding gold, “some profit taking could be a clever thing to do”.