Investors monitoring gold prices last week would have been shocked to see that 1.8 million ounces (2bn) were sold of the yellow metal in one minute, writes senior bullion dealer Oliver Temple.
It’s still a mystery but it seems likely that this was a ‘fat finger’ trade error – perhaps a more junior trader had mixed up ounces instead of lots. Nevertheless, this possible mistake did cause the gold price – which was around £970 an ounce – to fall to a low of £973 an ounce.
We’ve seen in recent weeks the yellow metal reacting strongly to particular events. Only a few weeks ago gold rose after the UK Election results and recently prices for the metal have been generally low. This is probably because of the stronger US dollar.
Take a cross section of the population and the reaction to investing in gold is probably the same. Many would say that it is risky.
Yet whilst this true for investors looking for quick-wins, if one takes a wider view, gold has historically performed well. For instance, a troy ounce in 1982 was worth around £203, today it’s about £960. In 2012, following the major economic ‘heart attack’ it was around £1,096.
So despite all its peaks and troughs, gold continues to be on an upward trajectory generally. Demand has also always tended to rise sharply in times of economic crises when investors turn to the precious metal as a way of hedging against losses.
Though gold prices are settling down again for the moment, it is possible that they will climb again – and rapidly – when there is more economic volatility.
We don’t know how the economy will be immediately after Brexit, for instance. There is also the situation in North Korea which investors will be watching closely (Seoul – a major financial centre – is close to the North Korean border). That’s apart from the general backdrop of Trump’s presidency. All potential ingredients that may push investors to turn to gold as a way of protecting their assets.
Now could be a good time to take a wider view of investing in gold. It could, in the medium to long-term, turn out to be a good investment indeed.
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