Commonly Asked Gold Investment Questions

 

 

The Pure Gold Company have compiled a list of questions that Google has determined – the most commonly asked questions when it comes to investing in gold when purchasing gold bars or gold coins. Below we have answered these commonly asked questions and have supplemented these questions with some that our existing clients have asked as a prelude to their own purchase. We hope you find these answers useful and if you have any further questions – feel free to get in contact via email or on 0207 060 6902 and our specialist can provide more detail where required.


GOLD AS AN INVESTMENT:

What factors affect the value of gold? / What moves gold prices?

Like all commodities, gold’s value fluctuates both up and down in response to market conditions, which affect demand for and supply of the precious metal. Demand for gold comes from four key sectors – jewellery, private investment, central bank reserves, and industry. Each sector is affected differently, and by different, changes in market conditions.

Rises in the price of gold occur when demand outstrips supply. Consumer and industrial demand and market instability are the primary motives for increased demand for gold. Jewellery demands about half of the world’s gold. Rapid population growth in the two largest markets for gold – India and China – fuels increasing demand. Industry requires less gold by tonnage, but exponential growth of hi-tech electronics places growing demand on supplies. Market instability drives purchases by private investors and, most importantly, massive purchases by central banks. Gold is a traditional safe haven for investment when markets are uncertain or falling, and financial institutions and individuals alike invest heavily. It was chiefly central bank demand during the 2008 global financial crisis and ensuing great recession that drove gold to an inflation-adjusted peak of 385% the 2005 price. Investor demand during the coronavirus outbreak has thus far driven a rise of 18% in a scarcely believable 74 days; meanwhile, the FTSE 100 has thus far plunged 47% in an unprecedented 56 days.

Falls in the price of gold occur when supply outstrips demand. Increased investor and central bank confidence in market stability is the chief motivator for divesting gold. When investors are confident that global markets will continue to rise, they accept greater exposure to lesser risk in investments that may appreciate more rapidly and potentially pay out dividends. If the price of gold drops below the level at which it is economical to extract it, mines may close (restricting supply) until the price returns.

The final factor that affects the price of gold is the value of the currency you use to buy it. Like all currencies, over time the British pound sterling becomes less valuable by a process of inflation. Over the last two decades the pound inflated by 50% – £10,000 in January 2020 is worth the equivalent of just £6,645 in January 2000 pounds. The relative value of the currency against the US dollar, the de facto global reference and reserve currency, also affects the price of gold in that currency. When central banks purchase gold, they often ‘print money’ to do so – weakening their currency and raising the price of gold in that currency. Over the same twenty-year period, the purchasing power of the pound has fallen 21% against foreign currencies. Both have effectively increased the price of gold in pounds sterling.

As with any investment, past performance is not a sure indicator of future results. Demand for gold can vary for myriad reasons. It is for investors to weigh the likely relative impact of these factors at present and in the future.

Why does the price of gold fluctuate?

Like all commodities, gold’s value fluctuates both up and down in response to market conditions, which affect demand for and supply of the precious metal. Normal daily trading drives fluctuation over the short term, usually within relatively tight margins. Medium-term fluctuation reflects demand for gold from four key sectors – jewellery, private investment, central bank reserves, and industry.

Rapid rises in the price of gold occur when demand outstrips supply, chiefly because of investors and central banks seeking to reduce or hedge their exposure to market instability. Medium-term rising trends reflect consumer and industrial demand. Jewellery demands about half of the world’s gold. Rapid population growth in the two largest markets for gold – India and China – fuels increasing demand. Industry requires less gold by tonnage, but exponential growth of hi-tech electronics places growing demand on supplies. Market instability also drives medium-term fluctuation, by generating demand from private investors and, most importantly, massive purchases by central banks. Sudden demand from those seeking to limit their exposure to riskier investments can drive explosive increases in the price of gold. It was chiefly central bank demand during the 2008 global financial crisis and ensuing great recession that drove gold to an inflation-adjusted peak of 385% the 2005 price in just five and a half years. Investor demand during the coronavirus outbreak has thus far driven a rise of 18% in a scarcely believable 74 days; meanwhile, the FTSE 100 has thus far plunged 47% in an unprecedented 56 days.

Falls in the price of gold occur when supply outstrips demand. Increased investor and central bank confidence in market stability is the chief motivator for divesting gold. This process typically happens more slowly than rapid rises characteristic of the panic buying which happens when investors seek to limit their exposure. Confidence usually returns more slowly than it departs, and

The final factor that causes the value of gold to fluctuate over the short term is the value of the currency you use to buy it. The relative value of the currency against the US dollar, the de facto global reference and reserve currency, affects the price of gold in that currency. When central banks purchase gold, they often ‘print money’ to do so – a vicious circle that weakens their currency and raises the price of gold they are buying using it.

As with any investment, past performance is not a sure indicator of future results. The price of gold can fluctuate for any combination of a myriad of reasons. It is for investors to weigh the likely relative impact of these factors at present and in the future.

What is the best time to buy gold?

Like all commodities, gold’s value fluctuates both up and down in response to market conditions. The ideal would be to purchase when prices are low and to sell when they are high.

Demand from investors seeking a safe haven to ride out global financial and political instability has caused the price of gold to rise significantly since the turn of the millennium. However, new investors should remember that current prices are relative to the recent past and future, not the distant past. Delaying or forgoing investment when prices are rising (or seem high by comparison to decades-old figures), in the hope that they will fall, leaves investors exposed to the market conditions that are driving the price higher.

What is the best online resource for the price of gold?

The price of gold changes every few seconds during market trading hours. This live price is known as the ‘spot’ price, and it represents the price of gold at the exact moment. The spot is mostly of interest to margin traders trying to exploit small differences between prices.

More useful for investors, especially those looking to compare gold prices over time, are the prices declared at the middle and end of the trading day. The London Bullion Market Association’s ‘fixes’ are internationally recognised as the definitive price of gold.

There are a number of online resources for viewing the spot and historic fix prices of gold. The LBMA’s website is an excellent resource, being easy to use, packed with data, and most importantly reliable and trustworthy.

Does the value of old gold increase or decrease with time?

Like all commodities, gold’s value fluctuates both up and down in response to market conditions. However, the overall trend is obvious: the price of gold has risen for more than fifty years. This rate has only accelerated in recent years: in 2000 a troy ounce of gold cost £184; in the first two months of 2020 it averaged £1,213 – even adjusted for inflation, a rise of more than 345%.

The world’s rapidly growing population has an insatiable appetite for gold for jewellery, investment, central bank reserves and industry. At the same time gold mines have begun to dry up – it’s estimated that less than 25% of global recoverable reserves remain unexploited. At current rates of extraction, in less than twenty years all reserves may be depleted.

Thus, the cause of price rises – ever-increasing demand far outstripping supply – looks set not just to continue, but grow.

Most financial advisors suggest investors keep a diversified portfolio. This spreads both risk and benefit, reducing investors’ exposure to falls in any one sector and allowing them to keep a mix of high-, medium- and low-risk investments.

Financial advice is tailored to the individual investor’s aims and appetite for risk. Inasmuch as it is possible to generalise, it is common for investors to hold a portion of their low-risk investments in gold as a hedge against other investments. While gold does not pay dividends or guaranteed returns, it performs in negative proportion to equities, which means that it will rise when the market falls, insulating investors from their exposure to equity risks. The volatility of equity markets during the last twenty years have resulted in their performance being massively outstripped by gold.

There are two fundamental ways to hold gold as part of an investment portfolio. Shares of gold funds, or ‘electronic’ gold, are easily bought and sold, but like most investments engenders tax liability, and lacks segregation, exposing investors to some risks of mismanagement. Physical gold is a tangible asset, which allows some companies to offer segregated storage for maximum security, and some types of physical gold don’t engender tax liability. However, physical gold engenders ongoing costs of storage and security, and is less liquid than ‘electronic’ gold. The difference between the buy and sell prices – the so-called ‘bid/offer spread’ – can also be wider. To prevent repeated exposure to the bid/offer spread, investment in physical gold is generally recommended for long-term investors. Some providers do offer access to rapid liquidity for investors who may need to access it in emergencies, or wish to respond to rapidly changing market conditions.

The development of services offering investment in physical gold, especially in segregated secure storage or at the investor’s discretion, is a response to market demand for ultra-secure safe havens in the unprecedently turbulent financial conditions of the 21st century. It is for investors to judge whether the costs and benefits of physical gold are a good fit for the aims of their investment portfolio.

Gold Bullion

REACTIONS TO MARKET CONDITIONS:

Is gold going to rise because of the new recession?

The price of gold changes in inverse proportion to equities. In a recession, when the value of equities plunges and remains depressed for some time, the price of gold can be expected to rise sharply as private investors and central banks purchase large quantities to hedge against the falling market.

The price of gold has consistently risen in response to major financial upsets in the present and recent past. During 2019 and 2020 – corresponding to severe pressure on the British economy as Brexit negotiations stalled and coronavirus emerged – the average price of gold rose 20% in just fourteen months. From late 2007 to early 2013 – corresponding to the onset of the global financial crisis and the great recession – the average price of gold rose 218% in just four years. In January of 1980 – corresponding with the onset of the early 1980s recession – the price of gold rose 52% in 19 days.

Predicting global economic recessions is notoriously difficult, and as with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely to recur in the near future, recession or not.

Should I invest in gold before the next recession hits?

The price of gold changes in inverse proportion to equities. In a recession, when the value of equities plunges and remains depressed for some time, the price of gold can be expected to rise sharply as private investors and central banks purchase large quantities to hedge against the falling market.

The price of gold has consistently risen in response to major financial upsets in the present and recent past. During 2019 and 2020 – corresponding to severe pressure on the British economy as Brexit negotiations stalled and coronavirus emerged – the average price of gold rose 20% in just fourteen months. From late 2007 to early 2013 – corresponding to the onset of the global financial crisis and the great recession – the average price of gold rose 218% in just four years. In January of 1980 – corresponding with the onset of the early 1980s recession – the price of gold rose 52% in 19 days.

The price of gold is one half of the equation to consider: the other is the safety of alternative investments. The last recession was the deepest since the Great Depression. During it Britain witnessed its first run on a bank in more than a century, and the Government was forced to intervene to prevent the collapse of five British lenders. The FTSE 100 fell 5.3% in a single day, and an average of 22% over two years. It is far from clear that investors’ money will be any safer in equities in the next recession than it was in the last.

Long-term financial forecasting – including predicting recessions – is far from an exact science, and as with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely to recur in the near future, recession or not.

Do gold prices always go up during a recession?

The price of gold changes in inverse proportion to equities. In a recession, when the value of equities plunges and remains depressed for some time, the price of gold can be expected to rise sharply as private investors and central banks purchase large quantities to hedge against the falling market. Rises in the price of gold are usually commensurate to the severity of the recession.

The price of gold has consistently risen in response to major financial upsets in the present and recent past. During 2019 and 2020 – corresponding to severe pressure on the British economy as Brexit negotiations stalled and coronavirus emerged – the average price of gold rose 20% in just fourteen months. From late 2007 to early 2013 – corresponding to the onset of the global financial crisis and the great recession – the average price of gold rose 218% in just four years. In January of 1980 – corresponding with the onset of the early 1980s recession – the price of gold rose 52% in just 19 days.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the fundamental forces that drove the price of gold up during past recessions will continue to do so in the next.

How does the price of oil affect the price of gold?

Oil is a commodity, just like gold, and both are important indicators of market health. Their relationship is largely inverse – demand for oil, and thus its price, rises when market confidence is high, whereas demand for gold, and thus its price, rises when market confidence is low. The relationship between oil and gold prices is largely correlative rather than causative – they both reflect the market, rather than directly influencing each other.

The price of oil is subject to significant manipulation by oil producers, who restrict supply as necessary to prevent significant price falls. However, political and financial considerations frequently override mutual production and pricing agreements, rendering the price of oil significantly more volatile than that of gold.

Although it may not be proportional, the general trend is still of an inverse relationship. During the global financial crisis, the average price of oil plunged 38% between late 2008 and early 2009. Over the same period the price of gold rose by exactly the same figure. From late 2014 to early 2015 the average price of oil plummeted 41%; over the same period the price of gold rose 6.15%.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the fundamental forces that drive the price of oil will continue to act in similar proportion upon gold.

Does gold go up in value when the US dollar weakens?

By virtue of the sheer scale of the economy that backs it, the US dollar is the de facto global reserve currency. When it weakens, the effects are felt worldwide. The dollar typically weakens:

  1. As a result of a monetary policy of deliberate devaluing, implemented by the US Federal Reserve – coincidentally, in its capacity as the American central bank, the holder of more than 8,133 tons of gold – to encourage investors to borrow.
  2. As a result of higher inflation, which depreciates the dollar’s value.
  3. As a result of trade deficits with, and falling export prices to, America’s trading partners.
  4. As a result of a weakening economy.

Federal Reserve policy of quantitative easing in the wake of the global financial crisis pushed interest rates to record lows, weakening the dollar substantially. The 17% fall in dollar index from mid-2009 to mid-2011 was partially responsible for a staggering 81% rise in the price of gold in just two years.

Acting slightly in opposition to this is that the price of gold is affected by the value of the currency you use to purchase it. The price of gold is denominated internationally by reference to dollars. It is for this reason that the London Bullion Market Association quotes its twice-daily ‘fixes’ in both dollars and pounds sterling.

When the dollar weakens, it does so against other currencies, especially the euro but often including the pound. This raises the price of gold in dollars, but lowers it in other currencies, effectively partially offsetting the rise in the price of gold for buyers paying in pounds. Unfortunately, the pound has had precious little to gain from this in recent years: over the last two decades the purchasing power of the pound has fallen 21% against foreign currencies, effectively increasing the price of gold.

As with any investment, past performance is not a sure indicator of future results. As global volatility increased over the course of 2019, demand from investors and central banks drove an 18% rise in the dollar price of gold even as the dollar strengthened, albeit slightly, by 1.6%. It is for investors to weigh whether market forces will drive demand even when the cost of gold has risen on the back of a rising dollar.

Gold Bullion

INTEREST RATES & INFLATION:

How do interest rates affect the price of gold? / What is the correlation between interest rates and gold price?

Interest rates affect the value of gold, but also reflect factors that affect the value of gold. Interest rates reflect levels of market confidence: when confidence that investments will make a good return is high, banks will offer higher interest rates in the hopes that customers will bank with the funds which the bank will in turn lend to businesses, hoping to turn a profit. When market confidence is low, banks will be pessimistic about their ability to generate profit from funds banked with them, and will only offer low-interest rates.

Market confidence is the chief driver in the value of gold: when confidence is high, investors will be prepared to accept increasingly risky investments in exchange for higher rates of return and, depending upon their investment type, dividends or other bonus payments. This lowers the demand for – and the price of – gold. When market confidence is low, investors will flee to traditional safe-haven asset classes, of which gold is perhaps the most traditional example. This increases the demand for – and the price of – gold.

Interest rates can also directly affect the price of gold, Low-interest rates reduce the amount of money investors can achieve from passive investments or cash storage, like savings accounts, ISAs and bonds. Investors typically keep a certain percentage of their portfolio in these low-risk vehicles. When interest rates are lower than inflation, these investments can end up effectively costing the investor money. For example, if an investor had placed £10,000 in a savings account in January of 2000, they would have effectively lost £2,039 of that over the ensuing 20 years because inflation has consistently outpaced the interest rates offered. Other investments of this type have performed scarcely better – an ISA would have gained a miserable 11% in value over inflation over the same period, barely 0.5% per year.

When interest rates are as low as they have remained for more than a decade – the average savings account has exceeded a 1% interest rate in just two of the last 134 months, and never since early 2013 – investors can see little point in leaving their money in places where it will do nothing but lose value. Gold, which is also considered a safe-haven asset and has wildly outstripped interest rates, is an obvious alternative. This increase the demand for – and the price of – gold.

The correlation between interest rates and gold prices, as a general rule, is simple. When interest rates are high the value of gold can be expected to dip or grow more slowly, and when interest rates are low the value of gold can be expected to rise.

How do interest rates and inflation rates affect gold?

Inflation affects the value of every item bought in any fiat currency. Like all currencies, the British pound sterling devalues over time by a process of inflation. This has the effect of making everything – including gold – appear more expensive than it used to be. Over the last two decades the pound inflated by 50% – an annual rate of 2.5%. £10,000 in January of 2000 has inflated to £15,049 by January of 2020; £10,000 in January 2020 is worth the equivalent of just £6,627 in January 2000 pounds. If the value of gold had not changed at all, the price of gold should have risen by the same percentage.

Inflation reflects the health of the currency, which in turn reflects the health of the economy that backs it. Inflation rates are also often deliberately manipulated as part of economic policy, but as a general rule when the currency is weak, inflation rises sharply. Elevated inflation causes cash reserves to drop in value quickly, which encourages investors to shift portions of their portfolio they might need to access quickly from cash to other highly liquid investments, of which gold is an excellent example. When inflation rates are high, the value of gold will typically rise significantly in excess of that rate. The value of gold has risen far and above its value in January of 2000. Had the same sum been invested in gold over the same period, it would be worth an average of £70,039. In real figures – that is, accounting for the 50% inflation over the period, it is now worth 465% of its original value.

Therefore, as a general rule, when inflation rates are high the value of gold can be expected to dip or grow more slowly, and when inflation rates are low the value of gold can be expected to rise.

Interest rates also affect the value of gold, but also reflect factors that affect the value of gold. Interest rates reflect levels of market confidence: when confidence that investments will make a good return is high, banks will offer higher interest rates in the hopes that customers will lend them funds which they will in turn lend to businesses for profit. When market confidence is low, banks will be pessimistic about their ability to generate profit from funds banked with them, and will only offer low-interest rates.

Market confidence is the chief driver in the value of gold: when confidence is high, investors will be prepared to accept increasingly risky investments in exchange for higher rates of return and, depending upon their investment type, dividends or other bonus payments. This lowers the demand for – and the price of – gold. When market confidence is low, investors will flee to traditional safe-haven asset classes, of which gold is perhaps the most traditional example. This increases the demand for – and the price of – gold.

Interest rates can also directly affect the price of gold, Low-interest rates reduce the amount of money investors can achieve from passive investments or cash storage, like savings accounts, ISAs and bonds. Investors typically keep a certain percentage of their portfolio in these low-risk vehicles. When interest rates are lower than inflation, these investments can end up effectively costing the investor money. For example, if an investor had placed £10,000 in a savings account in January of 2000, they would have effectively lost £2,039 of that over the ensuing 20 years because inflation has consistently outpaced the interest rates offered. Other investments of this type have performed scarcely better – an ISA would have gained a miserable 11% in value over inflation over the same period, barely 0.5% per year.

When interest rates are as low as they have remained for more than a decade – the average savings account has exceeded a 1% interest rate in just two of the last 134 months, and never since early 2013 – investors can see little point in leaving their money in places where it will do nothing but lose value. Gold, which is also considered a safe-haven asset and has wildly outstripped interest rates, is an obvious alternative.

Therefore, as a general rule, when interest rates are high the value of gold can be expected to dip or grow more slowly, and when interest rates are low the value of gold can be expected to rise.

Is buying gold a good way to protect money from inflation?

Any investment with a rate of return consistently exceeding inflation is in theory a good way to protect money from inflation’s relentless devaluing of currency. The only real exceptions to this are “investments” which involve simply trading cash from one currency to another, where no attempt is made at all to beat the inflation suffered by the held currency.

On this basis, investments should be assessed on their own merits – good investments are good investments, and the better they are, the further they will outstrip inflation. On the other hand, a causal relationship between high inflation and the value of the investment can make a specific asset class particularly well or ill-suited to the conditions which can sharply raise inflation. The relationship between inflation and gold is more correlative than causative, but the trend is generally clear. Inflation is both engineered (and manipulated) as part of monetary policy, but also a market response to confidence in the economy which backs the currency. The factors which can result in sudden rises in inflation – a lack of confidence in the economy, resulting in a lack of confidence in the currency – are also the factors which can drive sudden demand for gold and thus sudden rises in its price.

Judging gold by its past performance versus inflation is one way to assess whether or not it is a good investment. Over the last two decades the pound inflated by 50% – an annual rate of 2.5%. £10,000 in January of 2000 inflated to £15,049 by January of 2020. Over the same period the same sum invested in gold rose to an average of £70,039. In real figures – that is, accounting for inflation – the gold is now worth 465% of its original value.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise both inflation and the price of gold – political and financial instability, global upheaval, weakened currencies – are likely to increase, and the relationship between the two to remain.

Does the price of gold and silver outpace inflation?

Like all currencies, the British pound sterling devalues over time by a process of inflation. This has the effect of making gold appear more expensive, but meaningful comparison requires inflation-adjusted figures, known as ‘real’ values.

Over the last two decades the pound inflated by 50% – an annual rate of 2.5%. £10,000 in January of 2000 has inflated to £15,049 by January of 2020; £10,000 in January 2020 is worth the equivalent of just £6,627 in January 2000 pounds. Therefore, to have not lost money (that is, to be able to purchase the same goods and services as you would have been able to do in January of 2000) your investment would need to be worth at least £15,049 by January of 2020.

The prices of gold and silver have comfortably outpaced sterling’s inflation over the last two decades.

  • £10,000 sterling in January of 2000 inflated to £15,049 by January 2020.
  • Had the same sum been invested in gold over the same period, it would be worth an average of £70,039. In real figures – that is, accounting for inflation – it is now worth 465% of its original value.
  • Had the same sum been invested in silver over the same period, it would be worth an average of £42,138. In real figures – that is, accounting for inflation – it is now worth 280% of its original value.

Graph

Is this a good time to invest in gold?

Like all commodities, gold’s value fluctuates both up and down in response to market conditions. The ideal would be to purchase when prices are low and to sell when they are high.

Present and recent market conditions have already driven the price of gold from £956 in the first quarter of 2018 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 27%. On this basis, it might seem logical for a first-time investor to consider the price inflated, and decide to wait until it falls.

However, the average investor must take the market as they find it. While with the benefit of hindsight great benefit would have been accrued from the purchase of gold in the early 2000s, there’s no way to turn back time. Investors new to gold should remember that current prices are relative to the recent past and future, not those of two decades ago. Delaying or forgoing investment when prices are rising (or seem high by comparison to the distant past), in the hope that they will fall, leaves investors exposed to the market conditions that are driving the price higher. There is a reason that major buyers will continue to buy gold even at elevated prices – they believe that the price will continue to rise, and therefore missing out on further gains is simply a wasted opportunity.

In an era when markets can be crashed or resurrected in a matter of hours by events – be they shock political upsets, natural disasters or global pandemics – it is almost impossible to predict the price of gold over the very short term. Investors should understand that in the context of a 27% rise in the last two years a swing of 5% pales into near-insignificance, and consider whether the risk engendered in waiting for a potential fall after a comparatively minor rise in the recent past is worth the potential gain.

The fundamental drivers of rises in the price of gold are arguably at their strongest since the great recession, boosted by an unprecedented shutdown of the entire global economy. It is for investors to decide whether now is the time to take money from asset classes suffering equally unprecedented drops in value and secure it in one that is not.

Is gold a good investment for 2020? / Will the gold price go up during the next 12 months?

Financial forecasting, especially over the short term, is notoriously difficult. The international response to COVID-19 – by far the most important driver of financial markets at present – would have been utterly unthinkable as little as a fortnight ago. Such so-called “black swan” events – characterised by their rarity, severe impact and insistence by some that they were obvious with the benefit of hindsight – have arguably characterised the 21st century. Unprecedented acts of terror, the emergence from historically safe housing markets of the most severe financial crisis since the Wall Street Crash, the most severe financial depression of all time, shock election results and now a global pandemic have all rocked the global economy. When markets can be crashed or resurrected by an event no analyst considered likely, it is almost irresponsible to make any meaningful prediction about the worth of any investment over the short term.

Historic performance is one guide to the performance of gold in similar market conditions. In recent weeks the FTSE 100 has thus far plunged 47% in an unprecedented 56 days, representing some of the most severe financial turbulence of living memory. The price of gold has consistently risen in response to major financial upsets in the present and recent past. During 2019 and 2020 – corresponding to severe pressure on the British economy as Brexit negotiations stalled and coronavirus emerged – the average price of gold rose 20% in just fourteen months. The COVID-19 crisis has thus far driven a rise in the price of gold of 18% in just 74 days.

Even over the medium term the uncertainty of the last two years has already driven the price of gold from £956 in the first quarter of 2018 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 27%. If inflation and the performance of the last year recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £1,468 in the first two months of 2021.

Some analysts view present market conditions as presaging another recession. From late 2007 to early 2013 – corresponding to the onset of the global financial crisis and the great recession – the average price of gold rose 218% in just four years. In January of 1980 – corresponding with the onset of the early 1980s recession – the price of gold rose 52% in a scarcely believable 19 days.

As with any investment, past performance is not a sure indicator of future results, and in these utterly unprecedented times, it is almost impossible for investors to predict market movement in the short term. When investors are confronted with such volatility it is common for them to retreat to safe-haven assets such as gold, but it is for the individual to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely to continue throughout 2020.

What will be the expected gold price in the next 2 years?

Financial forecasting is far from an exact science. Even experts have been repeatedly blindsided by major events like the global financial crisis, even when the warning bells were ringing loud and clear. The world’s markets seem to be getting harder to predict, not easier – the upset election victories of political outsiders, the collapse of major financial institutions and multinational companies, conflict, extreme weather and the spread of disease have all taken experts by surprise just in the last two years. The impact of these unforeseen events on the global market cannot be overstated.

In uncertain times gold provides a traditional safe haven for private investors and central banks, and the uncertainty of the last two years drove the price of gold from £956 in the first quarter of 2018 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 27%. If inflation and the performance of the last two years recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £1,539 in the first two months of 2022.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely to increase in the next two years.

Will the value of gold increase in the next 5-10 years?

Long-term market performance is notoriously hard to forecast, and even the best analysts have been repeatedly blindsided even by foreseeable major events like the global financial crisis. The unforeseeable – political upheaval, financial crash, conflict or pandemic – takes everyone by surprise.

In uncertain times gold provides a traditional safe haven for private investors and central banks, and the uncertainty of the last five years drove the price of gold from £805 in the first quarter of 2015 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 38%. If inflation and the performance of the last five years recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £1,827 in the first two months of 2025, and £2,752 in the first two months of 2030.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely increasing in the next five to ten years.

What will be the price of gold 10 years from now?

Long-term market performance is notoriously hard to forecast, and even the best analysts have been repeatedly blindsided even by foreseeable major events like the global financial crisis. The unforeseeable – political upheaval, financial crash, conflict or pandemic – takes everyone by surprise.

Gold is a traditional refuge for investors from uncertain or falling markets. The financial crisis, political upset and unfavourable financial markets sent the price of gold from £713/oz in the first quarter of 2010 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 38%.

The global demand for gold continues to rise not just for investment, but jewellery, central bank reserves, and industry. Supply remains scarce, and by some estimates, in just 20 years such gold reserves as remain economical to extract may be depleted. If demand continues to rise and supply remains strictly limited, the price of gold will rise.

If inflation and the performance of the last ten years recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £2,064 in the first two months of 2030.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely increase in the next decade.

Will the price of gold double again in the next 20 years?

Long-term market performance is notoriously hard to forecast, and even the best analysts have been repeatedly blindsided even by foreseeable major events like the global financial crisis. The unforeseeable – political upheaval, financial crash, conflict or pandemic – takes everyone by surprise.

Gold is a traditional refuge for investors from uncertain or falling markets. The financial crisis, political upset and unfavourable financial markets sent the price of gold from £181/oz in the first quarter of 2001 to £1,213 in the first quarter of 2020 – even adjusted for inflation, a rise of more than 345% – far exceeding equities and the stock market.

If inflation and the performance of the last twenty years recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £8,129 in the first two months of 2040.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the world is becoming a safer, surer place, or one where securing a portion of their wealth seems increasingly not just cautious but obvious.

What is the long-term (5 years or more) trend in gold prices?

The long-term trend in gold price is inexorably upwards. Like all commodities, gold’s value fluctuates both up and down in response to market conditions, but even adjusted for inflation the price of gold has risen 419% in the last half-century. This rate has only accelerated in recent years: in 2000 a troy ounce of gold cost £184; in the first two months of 2020 it averaged £1,213 – even adjusted for inflation, a rise of more than 345%.

If inflation and the performance of the last twenty years recurred in the next, the price of gold would increase from the £1,213 average of the first two months of 2020 to £8,129 in the first two months of 2040.

The world’s rapidly growing population has an insatiable appetite for gold for jewellery, investment, central bank reserves and industry. At the same time gold mines have begun to dry up – it’s estimated that less than 25% of global recoverable reserves remain unexploited. At current rates of extraction, in less than twenty years all reserves may be depleted. Thus, the cause of price rises – ever-increasing demand far outstripping supply – looks set not just to continue, but grow.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely increasing in the future.

What would my investment five years ago be worth?

The prices of precious metals are a moving target, and there’s no better example than performance over the last five years. If you’d invested £10,000 five years ago:

  • In a cash ISA, it would be worth £10,478
  • In residential property, it would be worth £10,853
  • In ten-year government bonds, it would be worth £10,861
  • In silver, it would be worth £13,326
  • In the FTSE 100, it would be worth £14,026
  • In gold, it would be worth £15,990

What would my investment ten years ago be worth?

The prices of precious metals are a moving target, and there’s no better example than performance over the last ten years. If you’d invested £10,000 ten years ago:

  • In a cash ISA, it would be worth £11,307
  • In residential property, it would be worth £12,279
  • In ten-year government bonds, it would be worth £12,655
  • In silver, it would be worth £12,820
  • In gold, it would be worth £18,017
  • In the FTSE 100, it would be worth £20,911

What would my investment twenty years ago be worth?

The prices of precious metals are a moving target, and there’s no better example than performance over the last twenty years. If you’d invested £10,000 twenty years ago:

  • In a cash ISA, it would be worth £17,243
  • In ten-year government bonds, it would be worth £20,361
  • In residential property, it would be worth £29,766
  • In the FTSE 100, it would be worth £23,585
  • In silver, it would be worth £42,911
  • In gold, it would be worth £66,802

GOLD VS OTHER INVESTMENTS:

What is a better investment, gold or diamonds?

Superficially speaking, gold and diamonds can appear to be quite similar forms of investment. A historic relationship in the most commonly encountered form of gold – jewellery – means the two are never far from each other when most encounter diamonds. Both are tangible, finite, mined commodities, with extremely high value for their size. Both are prized for their lustre and used widely in industry, and both are traded internationally.

However, it is at this point that the two begin to diverge sharply, chiefly because of the simplicity of gold and the complexity of diamonds. Gold is at its simplest a raw element; every atom is identical, and like currency gold is therefore fungible – each unit effectively interchangeable. This makes the price of gold easy to establish, and the commodity itself almost universally accepted. These characteristics make gold one of the most liquid tangible investments – easily bought and easily sold, with buyers and sellers alike finding it very easy to establish a fair price. The supply of gold is controlled largely by simple supply and demand and difficult to manipulate, and the commodity itself has a rich and storied history as a unit of currency and investment.

Diamonds are significantly more complex. The quality of diamonds varies across an incremental scale of exceptional fineness and no two natural diamonds are alike, which means that assessments of their value can vary significantly between different traders. For many decades the price of diamonds was artificially inflated by price-fixing by enormous cartels, and even today the origin and pricing of diamonds can remain frustratingly opaque. It is for these reasons, amongst others, that the price of diamonds can experience significant volatility, making it a less stable investment than gold.

As with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether diamonds or gold better suit the aims and objectives of their portfolio.

Is buying gold jewellery a good investment?

Half of demand for the world’s gold comes from jewellery, which has assumed cultural significance across the entire globe, a position it has retained for millennia. The average citizen is far more likely to own gold in items of jewellery than they are as a specific investment, and yet they will also likely consider their collection a valuable item which might be sold in a time of need. Fundamentally, the gold that gold jewellery contains is similar to the gold that composes more traditional forms of investment, such as bullion or coinage.

In some respects, gold jewellery is, therefore, a type of investment with utility that traditional bullion lacks. It would be neither practical nor tasteful to wear gold ingots or coins, which are typically kept in safe storage and rarely see the light of day.

However, in other respects, gold jewellery has significant drawbacks as an investment compared to bullion. Gold ingots are internationally recognised – bars approved by the London Bullion Market Association (‘LBMA’) or other national authorities are globally recognised as having a value which closely reflects the market price of gold. Units of gold currency – for example, coins minted by the Royal Mint – have unimpeachable provenance and tax advantages that add known value over and above their gold content. It is above all the provenance and readily-determined market value which make physical gold bullion amongst the most liquid tangible investments available.

By contrast, the value of jewellery depends only partly upon the easily-determined value of the gold it contains. Whether or not its style is fashionable, or has a wide audience, can significantly affect the saleability of the piece. Pieces can be of uncertain provenance and are often of much lower gold contents than bullion – carats can vary widely from region to region and piece to piece. Therefore, the assessed value can vary equally widely upon seemingly arbitrary factors, which can make realising the value of jewellery challenging, especially if liquidity is required at short notice. While gold bullion and coinage, especially in large amounts, are typically kept in secure vaults – which usually engender some cost – ready access to jewellery means it is often kept in the home, creating risks and engendering insurance costs that can be off-putting for investors.

Jewellery is the most common way private individuals purchase an item largely composed of gold but can represent a relatively challenging investor experience. Buyers looking to make investment purchases should consider whether bullion or coinage better fits their needs.