Gold has retained its place as a safe-haven investment in 2014, despite the rising strength of the US dollar and turmoil elsewhere in commodity markets.
The price has remained stable and what’s more, experts believe that the long- term outlook for the precious metal is well supported over the coming year..
The price of gold looks set to end the year almost unchanged on 12 months, closing last week at around $1,175 (£755) an ounce after starting the year at $1,205. Fears of a crash in the price were overblown.
Goldman Sachs has now set its long-term forecast for the price of the yellow metal at $1,200 an ounce for the next three years.
The price of gold has an inverse relationship with the world’s reserve currency, the US dollar. A fundamental shift in American monetary policy this year has removed the main driving factor behind the price of gold during the past decade.
Global demand for gold has been weak during the past three years. The latest figures from the World Gold Council showed year-on-year gold demand falling by 6pc in the three months ended in September. Jewellery demand declined by 4pc, while bar and coin demand slumped by 21pc in the third quarter.
The first rule of investing is capital preservation. The resilience of the gold price, much like falling yields on UK gilts, is a canary in the mine of the global economy, showing that investors think the anaemic recovery could rapidly unravel without being propped up by money-printing. A balanced portfolio should hold an allocation of about 5pc in assets such as gold. The future is uncertain and gold is the most effective insurance against that.
Source The Telegraph
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