Gold surges as inflation fears see investors opt for safe haven

Omicron: 'More breakthrough infections' says South African doctor

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Traditionally seen as a key barometer of financial markets gold typically rises in value at times other investments such as shares are suffering. Head of Investment Analysis at AJ Bell, Laith Khalaf explained gold was “really an insurance policy against catastrophe.” He added: “Should we be facing a fresh round of more severe social restrictions across the globe, we can expect gold to shine, though that is tempered somewhat by central bankers becoming more hawkish about interest rate rises. However if it emerges that Omicron isn’t problematic enough to derail global growth, that would negative for gold.”

Gold is currently trading around £1,345 per troy ounce, with a month high of £1,406.

Chief Investment Officer at Saxo Bank Steen Jakobsen noted that gold was trading higher again after recovering from comments by chair of US central bank the Federal Reserve, Jerome Powell.

Yesterday Mr Powell confirmed an increase in efforts to cut inflation while suggesting the word “transitory” to describe inflation should be retired.

Mr Jakobsen commented: “Overall, gold chart looks increasingly messy with no clear signal to be found at present.

“A break above the (21 displaced moving average) at $1820 (£1366) is needed to spark fresh momentum interest while support continues to be found below $1780 (£1336).”

Since the identification of the new Omicron variant global markets have been extremely turbulent.

On Friday with new travel restrictions being announced markets around the world slid with shares in airlines, travel and hospitality taking particularly hit.

Gains since then were lost yesterday when the CEO of Moderna cast doubt over the effectiveness of current vaccines against new variants causing shares and oil prices to tumble.

Today in a report on economic outlook the OECD admitted Omicron could pose a threat to global economic recovery.

If such instability continues it’s possible gold could see even greater gains.

During 2020 gold prices rose considerably as the pandemic took hold and lockdowns and travel restrictions hit numerous sectors.

From a starting point of around £1,150 at the beginning of 2020 gold quickly accelerated to finally peak at £1,586.30 in August based on figures from the Royal Mint.

As well as market instability gold also provides a potential safety net against inflation with money held in cash losing its purchasing power.

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Inflation is already running well ahead of central bank targets in many countries and the OECD today also warned it could be worsened by any deterioration in the Covid situation.

Chief executive of the Pure Gold Company, Josh Saul, told FT Adviser: “The most notable trend is that many of the current buyers remember how gold and silver fared during the other lockdowns and are buying before it happens rather than in the middle or at the end.”

Mr Khalaf cautioned that as its main role was as an insurance policy gold “shouldn’t really make up more than five- 10 percent of a portfolio.”

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