Gold is heading out of 2018 in far better shape than may have been thought possible a few months ago.
The yellow metal is strengthening against its chief rival “safe haven” asset, the US dollar, as both the “Trump effect”, bolstering Wall Street, is seen to be fading, and as political turmoil shakes Washington.
While the most recent price per ounce is down 0.13% to £1,258.15, the medium-term picture is far more reassuring for “gold bugs” who believe bullion is as valuable today as it was when the Three Kings presented it as one of their gifts to the baby Jesus during the first Christmas.
Three-month picture is telling
There is some historical justification for this, when bullion values are measured in terms of the quantity of bread that can be bought for an ounce of gold. Over time, this has not changed since the time of King Nebuchadnezzar, who reigned several centuries before the Nativity.
But for today’s traders, the perhaps more relevant news is that a 12-month downswing seems to have ended.
The real story, however, may well have been seen during the last three months. Currently trading at just over $1,258, it had stood at $1,233.40 on 26 November and at $1,194.25 on 26 September.
Washington turmoil supports bullion
Its recent rally is not a mirror-image of the performance of the dollar, but this performance does underline the woes of its great rival during troubled times. The dollar’s current rate against the euro is about €0.801, 0.24% higher compared with the most recent trading session, while this stood at €0.8829 on 26 November.
It was higher compared with the current rate on 26 September, at €0.8517, and on 26 December 2017, €0.8432.
During periods of calm and prosperity, the dollar usually has the advantage over gold as a safe-haven and universally-acceptable store of value, not least because dollar assets pay a return, whether interest payments or dividends, while gold not only pays no return but incurs expense in terms of storage and security.
Only when times become more troubled does gold emerge as the only asset that is nobody else’s liability, unlike paper currencies, which depend upon a “promise to pay”. It cannot be printed or faked and is accepted as payment across the world.
The departure of key White House officials and fears of an end to President Trump’s boom – not least because of the winding down of stimulus measures – have, for now at least, cast a cloud over the dollar and burnished the attraction of gold.