Why are UK investors returning to gold?

Goldex Team

Editorial content

The investment panorama of 2018 shows a strong bid between classics and brand new alternatives, but the preference for gold has not changed in the UK. This is happening in a business environment flooded with tons of information of different types and emanating from different sources: economics, politics, technology, and emerging new economic products that keep us wondering if we are missing something important to add to our investment plans.  Are we sure that we are making the right choices?

It has been a well-known and often repeated mantra, not just for years but for centuries, that gold is the best way to preserve wealth. Every investment portfolio maintains a margin of protection and security that has its best representation in gold. Today, this is a conventional wisdom supported by numbers. In addition, data related to the UK gold market tends to confirm this way of thinking. If we look at the evolution of its price, gold has increased its value, at least in the last 10 years, from 400 Pounds Sterling in 2009, to 969.75 Pounds Sterling today (7/5/2018), getting close to a peak of 1,200 Pounds Sterling during the years of the UK economic crisis between 2010 and 2013.

This rise represents a 6% average increase in price per year, and the trend faithfully illustrates the preference of gold as an investment in medium and long-term strategies, notwithstanding the concurrent events that accompany every financial cycle.

It’s worth mentioning that at the end of its very much anticipated two-day meeting in Riga, on June 13th, the BCE confirmed the prospect of no interest rate hikes in the Euro Zone at least until Autumn 2019. This confirms that there’s not too much room for other investment bids in Europe, like forex, or commodities, like gold, for the rest of the year.

Roaring American market

On a separate note, at the other side of the Atlantic, a roaring American market following an interest rate hike announced by the Federal Reserve in June is expected to contribute to a lower domestic demand for gold in the US, at least in 2018. Therefore, an adjustment of its price in all the international markets can be expected for the upcoming weeks.

The mid-term investor should hold off buying until this adjustment is complete, at the beginning of the third quarter of 2018, and the reward will be granted in 2019. The confluence of local and global elements (the sustained demand in the UK domestic market of jewellery and the deceleration of the global economic growth in 2019) show that, in the United Kingdom, the eternal promise of gold is always a secure and profitable investment.