Gold prices were a little higher yesterday morning.
At $1.203.50 an ounce, the price was up $10.85, or 0.91%.
But the bigger picture remains distinctly mixed, with bullion prices failing fully to capitalise on gold’s status as a safe haven in times of trouble, despite there being no shortage of political and economic flashpoints around the world.
The last month has seen some strengthening of the price, which has risen from $1,195.75 an ounce on 4 September to $1,203.50 on 3 October. During that period, the high point was seen on 21 September, at $1,207.60 while the low was on 28 September, at $1,183.50.
Silver price also down
Over a longer timescale it is a different story. In the 12 months to 3 October the price has lost more than $70 an ounce. It stood at $1,275.55 on 4 October 2017 and had fallen to $1,203.50 by 3 October this year, a 5.6% decline.
During that period, the high point was on 25 January at $1,360.25, and the low point of $1,176.70 was seen on 17 August.
Gold’s safe haven status arises from the unique properties of the yellow metal. It is universally acceptable as a means of exchange and, in the form of coins and jewellery, gold is relatively portable. It’s a rather important consideration for people fleeing war or persecution or who may simply need, for whatever reason, to move their wealth without delay.
Furthermore, it is the only asset that is nobody’s liability. While national currencies rely on governments or central banks honouring a promise to pay, gold relies only on its own intrinsic value. Unlike national currencies, it cannot be printed, thus may effectively serve as a hedge against inflation.
However, its value expressed in dollar terms tends to decline during periods of peace and prosperity, such as the late Eighties and the Nineties, when its flaws as an asset become more apparent. Chief among these is that bullion, unlike shares or bonds, produces no return, its value being realised only when it is sold.
Another drawback is that storing and guarding gold costs money for investors .
Gold rivalled by dollar and Bitcoin
However, the current cocktail of risks worldwide could have been expected to bolster demand for bullion. President Donald Trump’s trade war may lead to a recession and, as has been pointed out, trade wars have a habit of turning into real wars.
Tensions between Russia and the west could almost have been tailor-made for a gold-price rally.
Explanations as to why the price has not been more buoyant include the tightening of monetary policy in the United States, making gold’s chief monetary rival the more attractive. In addition, some have suggested the growth of such as is giving investors an alternative safe-haven asset.