PA ANALYSIS: For gold's sake, stop talking safe havens

Added 24th March 2016

Gold has had a good start to 2016 but three months of positive fund returns and an upwardly mobile price are not enough to badge it as a safe haven.

PA ANALYSIS: For gold's sake, stop talking safe havens

Is gold a safe haven for investors? In fact should we consider anything to be a safe haven these days? Actually, what do we mean by safe haven? Is everything a safe haven until it isn’t?

Without getting into any kind of philosophical or existential debate, ‘gold’ and ‘safe haven’ are being mentioned in the same sentence more often these days - or ‘gold’ and ‘haven buying’ in the case of the Financial Times last week.

Gold’s latest price spike was on the back of the recent terrorist atrocities in Brussels and while it might be the case that gold usually struggles to hold these kinds of gain, it has risen in price by nearly 20% so far this year, up 11% last month which was the fastest one-month rise in four years.

The share price for gold producers has grown even more rapidly, as demonstrated by the FTSE Gold Mines Index leaping by more than 52% since the start of 2016.

As well as physical and security prices going up, so is the number of private investors which, according to BullionVault, doubled in February as they continue to look for some kind of insurance for their money.

Gold is also seen as a safeguard against macro or economic uncertainty and there is plenty of that around these days: China’s continued economic slowdown; the UK/Europe referendum; the timing of any return to emerging market equity investing - sentiment is strong and on the rise but is not yet being matched by fund flows; low global economic growth; a continued fall in bank shares; political risks; interest rate concerns; nervousness around weakening liquidity; and low oil prices to name a few.

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About Author

Gary Corcoran

Director

Portfolio Adviser & International Adviser

Gary Corcoran is the editorial director for Portfolio Adviser, International Adviser and Fund Selector Asia. He is also programme director and chairman for events hosted across the UK, South Africa, Middle East and Asia. Gary joined Last Word Media in August 2006 as the launch editor of Portfolio Adviser, having previously worked at Bacon & Woodrow, Legal & General, FT Business and MSM International.

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