This week in Gold – 15/10/2021
Price Movements
Gold opened the week at $1,756, and following an uneventful first half of the week the price had risen $4 per ounce by Wednesday afternoon. That was the case until an explosive move on Wednesday afternoon, which saw the price jump over $35. Upward momentum continued into Thursday as gold printed a high of $1,799. However, selling pressure around the $1,800 mark saw the yellow metal retreat, which saw gold fail to reach the key psychological level of $1,800. Friday saw a steep decline in the gold price as it fell by more than 1%. Silver also enjoyed a positive week, with the price hovering above $23.34 on Friday afternoon, after starting the week below $22.60.
Overall, a positive week for gold as the price is looking likely to close 1.5% higher on the week. After such a positive week in the gold and silver markets, it is important to assess the most popular reasons investors are currently citing for investing in gold.
Why are investors choosing Gold?
Portfolio Diversification –
Diversification is one of the key principles of investing. If an investor chooses to ignore diversifying their portfolio, they could risk losing everything if that one particular investment collapsed. The majority of investment portfolios are usually made up of financial assets like stocks, bonds and real estate. By diversifying their portfolios, investors are achieving additional protection from fluctuations in the value of any single asset or group of assets. The risk factors that may affect the price of gold are very different from factors that affect other assets and asset groups. During times of fear or geopolitical turmoil, the price of gold tends to rise, providing a hedge for other assets such as real estate as equities.
Currency Hedge –
Gold holds value against all currencies directly, making it an important trade for protecting against rising inflation rates, currency debasement or indeed a currency crisis. Gold, in turn, offers a way for investors to protect their wealth and purchasing power.
As a rule, when the value of the dollar decreases relative to other currencies worldwide, the price of gold tends to increase in U.S. dollar terms. In theory, a weaker US dollar makes gold more affordable, which increases the demand for gold which in turn drives up its price. With the opposite also being true, we can say that gold tends to have a negative correlation to the dollar.
Inflation Hedge –
Inflation is a measure of the rate of rising prices of goods and services in any given economy. Inflation makes money saved today less valuable tomorrow which is a concern for consumers as it diminishes their purchasing power over time.
Gold especially is considered a hedge against inflation, whereas inflation is one of the key risks for economy-based investments e.g., stocks. Gold is viewed as a safe-haven asset, when other markets crash, gold typically sees its value increase. Inflation and a declining dollar typically results in rising gold prices.
By purchasing gold, investors can shelter themselves from inflation and times of global economic uncertainty. This factor in particular is especially relevant at the moment as Eurozone inflation hit its highest level in 13 years in September.
Given the above reasons, if you are interested in investing in precious metals, please call us (01) 254 7901 or email us on [email protected]. Merrion Gold offers investors the opportunity of investing in precious metals at highly competitive prices. Clients of Merrion Gold have the option of investing in Gold, Silver, Platinum and Palladium, and can store their investment on site at Merrion Vaults from as little as €220 per year. Whether you are an experienced investor or interested in making your first investment in precious metals Merrion Gold would be glad to help.
