Sparkling rewards for gold buyers: The coronavirus crash sparked a rush on precious metals… but why are prices rising and is it too late to cash in?
Gold has always been seen as a safe bet in times of crisis, but the soaring value of the precious metal means savvy investors are now enjoying glittering profits.
The price of gold hit an all-time high last week, breaking the $2,000 (£1,500) an ounce barrier.
Prices dipped last night, yet gold’s value has still risen by more than third since the start of the year.
The price of gold hit an all-time high last week, breaking the $2,000 (£1,500) an ounce barrier and meaning its value has risen by more than 35 per cent since the start of the year
It means an investor who spent £10,000 on gold at the beginning of the year could have sold it this month for £13,523.
Gold sales have risen steadily as coronavirus has spread and crippled economies across the globe. Escalating tensions between the U.S. and China have also helped the price to surge.
Some experts have even predicted that the price could reach more than $3,000 by the end of next year.
Because gold holds its value against rising inflation, currency fluctuations and rock-bottom interest rates, it is seen as a safe haven for savings in troubled times.
Investors can buy bars of gold or stocks in a firm that deals in the metal. The recent price surge has also boosted shares in mining firms which extract the precious metal from the ground.
Janet Mui, investment director at wealth management firm Brewin Dolphin, says: ‘Gold has seen a perfect storm of conditions for its rally.
‘Looking ahead, central banks are likely to keep rates low for a very long time with tolerance for higher inflation.
There is also scope for the dollar bear market to continue in the next 12 months. So, although gold is now at a higher-risk stage of the rally, it may have further upside.’
You can invest in the gold price via the iShares Physical Gold ETC (exchange-traded fund), where a £10,000 investment made at the start of 2020, would now be worth £13,571.
Investors can also buy stocks in gold mining companies. FTSE 100 gold miner Polymetal has soared 68 per cent in value since the start of the year, turning £10,000 into £19,278, according to investment platform AJ Bell.
The same investment made in the BlackRock World Mining Trust would now be worth £11,539.
Investors at Bank of America last week said prices could reach $3,000 an ounce by the end of 2021, and Barry Dawes, of investment firm Martin Place Securities, predicted it could even hit $3,500 within two years.
Gold hit $1,889 an ounce in September 2011, but fell to $1,056 an ounce at the end of 2015.