Gold Is Shining Bright Among Investors Even as Faith That Central Banks Will Make Hefty Cuts to Interest Rates This Year Dims

The spot price of gold (GC=F) has risen to $2,354.20 per ounce, hovering near record highs, meaning gold has now risen over 14% since the start of 2024.

Gold prices continued to rise on Wednesday, remaining close to record highs as traders awaited the US Federal Reserve’s policy meeting minutes and inflation data for fresh signals on future US rate path.

Spot gold (GC=F) was trading at $2,354.20 per ounce, while US gold futures rose 0.2% to $2,361.40.

Among other precious metals, silver (SI=F) rose 0.8% to $45.13 per ounce, while platinum (PL=F) gained 0.3% to $1,486.04. Palladium (PD=F) was down 0.1% at $3,224.73.

Why are gold prices going up?

Gold is traditionally seen as a safe-haven in difficult times, and as a hedge against inflation.

The precious metal has had a record-breaking run since mid-February, boosted by expectations for US rate cuts, geopolitical tensions and China’s economic woes.

However, futures traders have reduced bets on how much the US Federal Reserve will cut rates this year to the lowest level since October.

Traders now expect fewer than three quarter-point cuts to US interest rates this year, down from up to six cuts expected in January.

Usually, high interest rates dull the appeal of holding non-yielding gold, but the precious metal has been ignoring these factors so far.

Some central banks have also been adding to their gold reserves, with China’s central bank purchasing gold for its reserves for a 17th straight month in March.

Kristina Hooper, chief global market strategist at Invesco, said that concerns around the US debt could be pushing some towards the precious metal.

“Then there is the concern about US debt and the long-term unsustainability of the US’ fiscal situation. That seems to have caused some central banks to increase holdings at the expense of US Treasuries,” she said.

Analysts at Bank of America said in a note that gold could rally to $3,000 per ounce by 2025.

If I had invested £100 in gold, how much would I have now?

Given the safe-haven status of gold, the precious metal would have been a safe bet to park your money.

If you put £100 in gold in 2023 you would now have £121. However, despite the precious metal rally, had you put those same £100 in bitcoin (BTC-USD), you would today have £396.

Surprisingly, this one commodity performed also as good as the cryptocurrency. Cocoa (CC=F) is up by around 270%, which would have secured you £373.

Amazon (AMZN) and Apple (AAPL) shares, two of the Magnificent Seven, would have also outperformed gold. However, their track record shows far more volatility that most investors might be comfortable with, as is the case with Bitcoin.

How do I invest in gold?

Gold falls under the category of alternative investments, named like that as they are usually defined as alternatives to traditional investment assets, such as bonds and equities. They can be anything from art to property, hedge fund investments, gold and gold funds, and digital assets.

For those wanting to protect their investment portfolio from market uncertainty, it is worth considering gold.

Anyone can invest in physical gold in the form of bars and gold coins. The Royal Mint has recorded a 7% increase in investors purchasing gold bullion last year.

However, it might be easier and cheaper to invest in gold through Exchange-traded funds (ETFs) or Exchange-traded commodity (ETC) products.

Another way to go about it is to invest in shares of gold mining companies, which should get you dividends as you are investing in a business and not purely on the precious metal.

Let's take a look at these three ways to invest in gold.

Should you buy gold coins or bullions?

It is probably the first image on our mind when we thing about the precious metal: a gold bar or coins. If you go down this route you are investing in the physical metal.

Gold coins are a popular choice but mostly for collectors as you will pay a premium for the design that you might not get back. However, some coins become more desirable for collectors over time so the gambit could pay off.

If you're not bothered by the aesthetic value of gold, the straight way to go about it is to get a cast bar. A 500g will set you back £30,565 if you purchase it from the Royal Mint.

However, you can start smaller, with a 2.5g bar coming in at around £170. Regardless of what you get, make you the purity is above 99.