ALTHOUGH it acts as a good diversifier gold is notoriously unpredictable. However, it is attracting attention as it is one of the top-performing asset classes of the year so far, rising in value by over 25 per cent in the second quarter before consolidating its gains last month.
With the prevailing low and falling interest rates in the US, Europe and elsewhere cash has not been on many investors radar screens in recent years. Gold does not pay most investors any interest so you have to hope someone else will pay more for your gold in the future in order to make a profit.
In a world where central banks have been printing money and government deficits have ballooned, the appeal of gold to investors is easy to understand. Although gold was stagnant for over a decade in the 1990s its price soared during the financial crisis.
Unprecedented money printing by central banks and soaring government deficits have provided a fertile backdrop by encouraging investors to seek out alternative forms of money authorities are unable to debase.
