Should I be investing in gold?

Early on Tuesday 2^nd September, the price of gold hit a record high of $3,508.50 per ounce, in continuation of an upwards trend that has seen the price rise by circa 30% this year alone. Headlines such as this will understandably grab attention; hopefully this short piece can provide further clarity on the pros and cons of investing in gold.

Historically, gold has been considered by many to be a safe haven for investment during periods of economic volatility, and it can be seen as a useful hedge against inflation. Given the economic volatility that we are currently experiencing (in no small part caused by the Trump tariffs and ongoing conflicts in Ukraine and Gaza) and stubborn levels of inflation that the UK Government & Bank of England are trying to curb, it seems that we find ourselves in something of a perfect storm, creating the conditions for gold prices to reach such highs.

It should also be said that the price of commodities such as gold do not tend to move in tandem with equities or bonds. The price of one is not specifically connected to the price of the other, and they can therefore appeal to some investors by providing further diversification of their investment portfolio.

Notwithstanding the above, it should also be understood that the price of gold and other commodities can be volatile. There can also be supply-and-demand issues caused by exploration & extraction activity, or by global economic growth rates / rates of inflation. As such, while gold can undoubtedly offer diversification to a portfolio, its pricing is cyclical, which therefore means that good timing is essential.

At Solomon’s, a key proponent of our investment philosophy is simple, that time spent in the market will have a greater impact on achieving positive results than attempting to ‘time the markets’. As we know, investing in equity markets exposes us to the risk of potential periods of shortfall as markets react to events we’ve all lived through, such as Trump’s tariffs, Covid-19, or the 2008 global financial crisis. Despite these events, we have all witnessed the market’s bouncebackability (I assure you that’s a real word – you can google it!), with the latest example being the recovery of the markets so far this year.

For anybody seeking further guidance on the topic, you know where we are, we’ll be more than happy to help.