Why Isn´t Gold Booming

Given gold´s perceived role as a safe haven there have been many comments in the media about gold´s "surprising" 10% or so decline in price during the recent market turmoil when many commentators were expecting it to soar in value.

In reality tthe 10% decline is from the peak price achieved at the beginning of March.  Year to date it has fallen 2.3% but over 12 months it has gained over 13% - in dollar terms.

Ishares SGLN Physical Gold US$ (year to date)
Ishares SGLN Physical Gold US$ (12 months)

UK investors have fared better as in sterling terms gold has increased by 8.8% year to date due to the fall in sterling against the dollar and by 29% over the last 12 months showing the value of gold as protection against currency devaluations.

Russ Mould of AJ Bell in an article today gives the principal reason for gold´s recent price decline as the need of traders and investors to raise cash to "meet margin calls, settle fund redemptions or simply rustle up ready cash".  He sees the situation as analogous to the 2008 crash when gold behaved similarly but rallied strongly once investors had more confidence in the markets. I hold some gold via Ishares SGLN in my Permanent Portfolio and although I had hoped for more than its 3.4% rise since September 2019 is certainly better than the 18%+ fall in the equity part of the portfolio (overall portfolio decline of 3.7%).


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