Brexit and the continuing bad, or even more tense, trade relations between the United States and China are the main drive of the skyrocketing yellow metal price. The trade wars that are elsewhere in the world, have also greatly influenced the price of gold, and the metal has exceeded its top of £ 1,204.63 per troy ounce from 2011.
The fact that the pound was the weakest against the dollar since 2017 also helped to increase the price. Investors therefore bought gold covered by this currency.
The economic situation is unstable and only very few people really know where the world economy will go. This leads investors to a desire for defensive assets that diversify risk well and protect other investments when bad economic times occur.
Some of these assets, such as bonds, do not offer as attractive returns as gold, making the metal more attractive to investors. Specifically, in Great Britain, for example, bonds have offered low returns for almost 10 years.
At the same time, the situation forces central banks to keep or even lower their interest rates, which also leads to a greater desire to invest in gold.
The metal was also helped by the British ETF, which, according to the World Gold Council added 63 tons of yellow metal worth about $ 3 billion into their holding. The British ETF accounted for 60% of the overall increase in ETF funds' demand for gold.
Gold is doing well in other currencies as well. In US dollars - the most common indicator of its price - a troy ounce cost more than $ 1,450, a six-year maximum. It performs equally well in Indian rupees, for example.
Yellow metal is very popular nowadays and according to Ross Norman, director of Sharps Pixley, business wars and brexit are not the only reasons investors want it in their portfolio. He claims that investors have finally come to realize how good gold is and how strong it is in times of economic uncertainty.
"Gold is pushed forward by investors' feeling that something is not quite right," says Norman about the economic situation and the desire to invest in gold.
Redakce IBIS InGold, 20. 8. 2019