Making money: what the experts think
Losing lustre
Global demand for gold fell to its “lowest level since 2009” in the first half of the year, as investors opted for “riskier assets”, said Julia Kollewe in The Guardian. The fall in demand for the precious metal – traditionally seen as a safe haven in times of trouble – was exacerbated by the fact that “consumers bought less gold jewellery, particularly in India where an inauspicious period for Hindus led to fewer weddings”. Central bank purchases also slowed. But the biggest impact came from a steep decline in buying by gold-backed exchange-traded funds in the States. ETFS bought just 60.9 million tonnes of gold in the past six months, versus 160.9 million tonnes in the same period last year, according to the World Gold Council. Gold, it seems, has really lost its lustre.
Price impact
Gold is “out of favour” because investors are chasing “higher returns”, said Neil Hume in the FT. It’s a “non-interestbearing asset” – and the US Fed “has lifted interest rates twice this year and has signalled further rises are on their way”. “What is more surprising” is that the price of gold hasn’t “benefited from the volatile geopolitical backdrop”. Currently trading at about $1,219 an ounce (down some 6.5% since the start of the year), gold has posted four straight months of losses, suffering “its worst run since 2013”. Hedge funds and speculators are now “betting aggressively” that the price will fall further.
Shifting sentiment?
There’s not much sign of an about-turn in sentiment in US stock markets, where animal spirits continue to trump caution. The S&P 500 is back in record-high territory, and Nasdaq close to a new all-time peak – despite the still-escalating trade war with China. Yet elsewhere banks have begun issuing warnings that “the trade war may kill the bull market”, said Anna Isaac and Iain Withers in The Daily Telegraph. The East-west conflict has now reached a “tipping point”, with trade tensions and the impact of tariffs only likely to increase, warned UBS this week. The Swiss bank has “cut its position on global equities”; it has also urged clients to guard against sudden currency swings and advised them to move their money out of “cyclical stocks”.