RE: billy/evi/les18 Jul 2021 15:16
Investors urged to buy gold as inflation surges higher
The precious metal is still the best inflation hedge – and it’s on sale
Experts have urged investors to buy gold to protect their portfolios against a surge in inflation as the reopening of economies around the world unleashes pent-up demand.
Investment banking giant Goldman Sachs has advised clients to snap up the precious metal, viewed as a bulwark against rising prices, while fund managers said investors needed an “insurance policy” for their portfolios.
Inflation reached a 13-year high in America, the US Department of Labor reported last week, climbing to 5.4pc in June and shocking economists who had expected the pace of price rises to slow. In Britain, the consumer prices index measure of inflation hit 2.5pc in June, rising further above the Bank of England’s 2pc target.
Gold trades at around $1,800 (£1,300) an ounce, but Mikhail Sprogis of Goldman Sachs said it should be worth at least $2,000 today – and more if central banks such as America’s Federal Reserve failed to react to a continued surge in inflation.
“It has the potential to rally significantly in the event that the global recovery is hampered or inflation picks up strongly and the Fed underreacts,” he said. “In this scenario, gold prices should benefit in the same way as they have done during prior periods of excessive inflation.”
Gold is seen as a store of value when inflation rises, in contrast to currencies, which lose their value in real terms. John Chatfeild-Roberts of Jupiter, the investment firm, said: “If there is sustained inflation, gold will hold its value.
“But gold has done well over the past 20 years, even when there has been no inflation. It also goes up when other investments go down – that’s why it is still important to own it to protect a portfolio.”
Despite the rise in inflation this year, gold has so far performed poorly in 2021. It has fallen by 3.5pc in value while British and global stock markets have delivered double-digit returns.
However, Catherine Doyle of Newton Investment Management said it should still form a central part of investors’ portfolios. “It’s a currency that cannot be manipulated by central banks, with limited supply and good inflation hedging properties,”
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