Investors are moving to gold

The price of gold hit an all-time high of $2,513.79 (£1,932.87) an ounce on Tuesday morning as investors hope the US central bank will cut interest rates.

The increase in the price of the precious metala haven asset for investors due to its real-world use cases and widely held intrinsic value, means the price of gold is now up nearly 22% this year alone.

It also priced a standard 400 troy ounce gold bar, which weighs 12.4kg, at $1m (£768.9m) for the first time.

Growing expectations of a rate cut by the Federal Reserve (Fed) are seen as the main reason for the recent price increase.

John Reade, a senior market strategist at the World Gold Council said City AM: “In the last 24 hours we have seen gold reach new highs.

Amid strong demand from central banks and ongoing political and geopolitical buying, the recent move appears to have been driven mainly by speculators and investors on New York’s Comex futures market (a commodity futures market). , presumably in anticipation of interest rate cuts from the US Federal Reserve, which is expected to begin cutting rates in September.”

Gold tends to rise as interest rates fall, as lower yields on cash held in a bank – or bonds issued by governments – push investors away from cash or debt and into the metal.

But other factors have driven the price of gold higher in recent years. Gold’s rise has been helped by widespread inflation seen since the end of the pandemic and rising geopolitical tensions around the world.

According to analysis by investment platform AJ Bell, the value of physical gold has risen by 50% in nominal terms over the past three years, outpacing Bitcoin’s 43% rise and the average 27% rise in a global global index.

Central banks – especially those in the global south – have been buying the metal at record rates over the past two years. They saw the asset not only as a sensible hedge against inflation and geopolitical tensions, but also as a means of diversifying away from the dollar after Western countries chose to freeze much of Russia’s dollar reserves after the invasion of Ukraine.

Laith Khalaf, head of investment analysis at AJ Bell, said: “Gold has delivered on its promise as an inflation hedge over the past three years, creating a healthy real return for investors.

“This is despite rising interest rates, which in theory should take the shine off the precious metal.

“Central banks have been attracted to gold because it is liquid, has no credit risk and is free from any geopolitical interference.”

After AM city

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