Gold back in vogue with investors amid uncertain economic outlook
The shoppers thronging Harrods department store in London love a bargain as much as anyone, but in one corner of the second floor the prices have already risen 19 per cent this year.
This is where the upmarket store sells its gold bullion, giving people the chance to buy the precious metal as an investment during uncertain economic times. A gold sliver resembling a mobile phone SIM card costs about £40, while a kilo, similar in size to a small chocolate bar, is available for £29,000.
Shoppers can purchase bars embossed with the store’s famous logo, while Chinese buyers may like the Year of the Monkey image. Even a Jean Paul Gaultier motif is available for a small premium.
It is a long way from Harrods’ display cases to the vast mines around the world that extract the precious metal. But these diverse parts of the gold industry are revelling in the strongest opening to a year for more than three decades, with the gold price hitting a 13-month high of $1,283 per ounce on Friday, raising hopes of an end to a damaging downturn for the sector.
Gold is back in demand amid increasing concerns over the health of the global economy and the ability of central banks to engineer a recovery. When the European Central Bank further cut interest rates on Thursday, it helped to drive up the price of gold, which is seen as a safe haven asset.
The same belief that is animating gold’s retail buyers is spurring the shares of leading miners. Barrick Gold, the world’s largest gold miner by volume, is up about 90 per cent so far this year. Randgold Resources, the most valuable of the UK-listed miners, is up 54 per cent over the same period. And miners’ stocks in Australia and South Africa have rocketed as weaker local currencies have boosted earnings.
For investors, the recovery is well overdue. Gold’s US dollar price peaked in 2011 and since then, the leading miners of the precious metal have written off tens of billions of dollars of investments made during a decade-long bull market. According to Deutsche Bank analysts, writedowns from just the four leading North American miners — Barrick, Newmont Mining, Goldcorp and Kinross — add up to $57bn over the past five years.