Gold price passes major milestone: up 23% YTD in sterling terms

Gold hit a major milestone for UK investors this week as the yellow metal hit £2,000 per Troy ounce, fuelled by global precious metals gaining on increasing expectations of accelerated rate cuts from the US Fed and heightened tensions in the Middle East.

In sterling terms, gold has risen by 23% since the start of this year.  This has reinforced the view that investors believe gold is a ‘safe-haven’ asset during times of geopolitical and economic uncertainty.

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From The Royal Mint’s own data, in September, buying has outweighed selling by a ratio of 2 to 1 among investors, suggesting many believe the yellow metal could rally further this year and beyond. With opinion polls suggesting that several swing states are in a ‘virtual tie’ ahead of the US election, there could be further gold purchasing as investors look for new opportunities in the market.

US election news driving gold-buying

John Reade, Senior Market Strategist at the World Gold Council, said: “Speculation, especially in US futures, has been driving this rally, but as I have been saying for a while, for prices to hold or climb further we need stronger Western investor interest.”

“Modest ETF inflows are a good start, but with economic uncertainty still on the horizon, it’s now all eyes on the US for the election and Europe for the next move.”

Gold keeps setting new all-time highs in almost all world currencies. This relentless run is hurting consumer demand in the giant jewellery markets of China and India.  It’s yet to really catch the attention of Western investors, who continue to take profits net-net as a group. But this could change quickly.

Hot-money traders in futures and options contracts are behind gold’s latest all-time records, betting that the precious metal will jump further as Western central banks cut interest rates. But this strong uptrend in the price of gold is supported by Asian and other emerging-market central banks buying bullion as a way of spreading their investment and also political risk. China, India and many other sovereign states are cutting their exposure to USD, EUR and GBP as the geopolitical fissure between the West and the rest widens.

Could 2024 be a bumper year for gold?

But while gold’s 2024 gains are dramatic – outpacing the FTSE All-Share’s rise of 7.3% so far almost THREE times over – the precious metal has risen faster year-to-date 11 times before, and then gone on to end December higher again FIVE times.

Analysis from BullionVault says that this year’s run already beats all but six full-year totals for new sterling records over the past 57 years, since gold prices began trading freely in 1968.

This year’s run of new record gold prices marks the highest total since 2011 – when widespread riots in England coincided with US government debt being downgraded as the Eurozone debt crisis peaked, spurring 32 new daily highs in the UK price of gold by the middle of September. It also now matches the full-year total of 2008, when the global credit crunch became an all-out financial crisis with the collapse of Lehman Brothers.

This year in contrast has seen Western stock markets also set new all-time highs, even as political violence has worsened with growing fears of wider conflict in the Middle East, South China Sea, and over Ukraine.

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