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There has been great news for holders of gold in early trading this year, with the gold price rise of over 15% since the start of the year. February has proven to be a bumper month for investors, with gold finishing strongly to post the highest gains across a single month for over four years, at a little over 10%. To put this into perspective: gold has been amongst the strongest asset classes in 2016, outperforming oil, emerging markets, the S&P 500, the US dollar and the bond market.
One American analyst has even gone as far as to say that buying gold today may be comparable to ‘buying stocks in April 2009.’ The same analyst, predicting further positive future returns for gold, noted that between April 2009 and November 2015, the S&P 500 Index charted a 145% rise.
Whatever the future holds, the gold price rise to $1,230 per ounce by the end of February (up from $1,050 shortly before Christmas) has shown once again that it’s the ‘go to’ option for the protection of wealth. Gold has historically risen during periods of economic uncertainty and, so far this year, it is showing that it still possesses those desirable qualities for investors. With concerns around China, the wider world economy and Britain’s potential exit from the EU, it’s little surprise that gold has created both potential buying and selling opportunities for those who do and do not currently hold the metal as part of their portfolio.
In fact, gold holders are benefitting in two distinct ways from the discussion of Britain’s potential ‘Brexit’. With business leaders and markets worried about the impact on the economy, should Britain turn its back on the EU, it’s fair to say that gold’s price has been buoyed. Whilst this has been happening, however, sterling has also fallen against the dollar, further boosting the sterling price of gold for UK investors. In Sterling terms, gold has risen a massive 22% this year, with 14% of that coming in February alone.
On a day to day level, we’ve seen a huge spike in enquiries with investors moving quicker to complete a purchase than at any time since 2008. In contrast, there have been few sellers, with most wishing to hold their position with more price rises predicted on the horizon.
With so much demand, supply of the right type of gold is starting to become squeezed – another sign that prices will continue to rise and possibly also increase premiums in the near future.
These factors, combined with the prevailing economic winds and the ongoing political climate, look likely to mean one thing: it’s going to be a very interesting year for those of us who hold gold!
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.