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ROSS NORMAN : Gold Rallies For UK Investors ... AGAIN

The interest rate cut by the Bank of England from 0.5% to 0.25% - the first cut since the economic crisis started - saw the pound fall sharply and correspondingly gold for UK investors saw a significant rally from GBP 1012 and ounce to GBP 1031 an ounce - a gain of just under 2%. 

The price rise for UK gold investors - which remains a minority sport here - caps a gain of 42.2% year to date.

The move reaffirms gold as the "go-to asset" in times of economic duress. The UK market is very modest compared to say the German market which is 10 times larger in terms of volumes of coins and sold, 10 times larger in terms of the domestic central bank gold holdings and Germans also have demonstrated 4 times the propensity to save compared to us Brits. However, with the macro economic environment darkening, there are signs that savers remain concerned about the vulnerability or even fragility of the banking sector and there are only so many options one can go to.

Some will look at the gains in the sterling price for gold and wonder whether they have missed the boat. Buying insurance while your house is on fire is rarely and effective strategy in our view - but there is still plenty of potential upside. Gold is still 41% below the levels seen in 2011 and arguably the rationale for buying now - as opposed to then is significantly greater. 

04 Aug 2016 | Categories: Gold

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