Gold is seen as a key hedge against inflation and with prices accelerating, the precious metal should be shining right now. But it isn’t.
Instead, the gold price has been stuck in what Matt Weller, global head of research at StoneX Financial, calls “its well-trodden four-month range between $1,725 and $1,830”.
At the time of writing, it is trading at around $1,800, more than 15 per cent below its all-time high of $2,084, which it hit in August 2020 at the height of Covid-19 uncertainty.
Gold has been a store of value in troubled times for 4,000 years, so why aren’t investors clamouring to buy it in these uncertain times?
Is current weakness a buying opportunity, or a sign that gold simply isn’t as attractive as it was?
Gold should really be doing better amid slowing global growth, supply chain bottlenecks, rising energy prices and lingering pandemic fears, says Georgios Leontaris, chief investment officer of global private banking and wealth at HSBC.
However, there is enough good news out there to offset this.
“Corporate profitability remains healthy with a solid start to the Q3 earnings season, while resilient consumer demand, the need to rebuild low inventory levels and large climate and infrastructure investments should extend the economic cycle further,” Mr Leontaris says.
The Covid-19 vaccination drive is keeping most economies open, which also reduces the demand for a safe haven. Investors are worried, but not worried enough to pile into gold.
Even if inflation takes off, there is no guarantee that gold prices will follow, Mark Leale, head of Quilter Cheviot’s Dubai office, says.
The market expects central bankers to increase interest rates to combat inflation. If they’re right, gold could continue to struggle because it does not offer any yield
Mark Leale,
head of Quilter Cheviot’s Dubai office
“The market expects central bankers to increase interest rates to combat inflation. If they’re right, gold could continue to struggle because it does not offer any yield,” Mr Leale says.
Many emerging markets have already started monetary tightening and the Bank of England is gearing up to increase base rates at its next meeting on November 4, says Arnab Das, a global macro strategist for Europe, the Middle East and Africa at Invesco.
“The European Central Bank is tapering the flow of its monthly asset purchases, while the US Federal Reserve is signalling hikes are not far off.”
After years of near-zero interest rates, investors would love to get a better yield from cash and bonds (or any yield at all). They won’t get it from gold.
Even the US-China trade issues are not favouring gold, Mr Das says. “Geopolitical tensions persist, but do not seem to be threatening to spiral out of control”.
So once again, investors are worried, but not worried enough.
Gold finds itself “stuck in a no-man’s land between the booming stock market and cryptocurrencies”, says David Jones, chief market strategist at Capital.com.
The gradual US dollar recovery has also held it back. Gold is priced in dollars, so when the greenback rises in value, it gets more expensive for buyers in other currencies, suppressing demand.
There could be another factor at play here. Whisper it, but is gold looking a bit old-fashioned? Mike McGlone, senior commodity strategist at Bloomberg Intelligence, reckons it is.
He calls gold an “analogue store of value” that is set to be replaced by a digital one – Bitcoin, which he says “is well on its way to becoming a digital reserve asset”.
Mr McGlone believes the recent launch of several Bitcoin exchange-traded funds (ETFs) will help to drive the trend, and so could the new regulations in China on cryptocurrencies.
Gold finds itself stuck in a no-man’s land between the booming stock market and cryptocurrencies
David Jones,
chief market strategist, Capital.com
“The West now has a vested interest in the success of Bitcoin and cryptos, as it could establish a new digital world order,” Mr McGlone says.
Not everyone is convinced. Some have called Bitcoin digital gold, but Mr Leale rejects the theory that it can do the same job.
“Bitcoin’s price doubling, halving and doubling again is not a convincing argument that it acts as a store of value,” he adds.
People may be losing faith in fiat currencies due to central bank manipulation, but cryptocurrencies are no replacement, says Jai Bifulco, chief commercial officer at Kinesis Money.
“When the value of currencies is thrown into question, people are drawn to tangible assets – often in the form of raw materials,” he says
Gold ticks all the boxes. “It is universally valued and the supply is steady. Investors need a stable store of value and gold can protect you from the unknown turbulence to come,” Mr Bifulco says.
Cryptocurrencies cannot match the long-term track record of gold, Boris Ivanov, founder of mining group Emiral Resources, says. “Despite all the noise, they are unanchored currencies and their value remains extremely volatile, unlike gold, which has remained a safe haven for centuries.”
This millennium has been good for gold, which is up more than 500 per cent, Mr Ivanov adds. “Investment trends come and go, but gold remains and shines brightest in times of inflation and uncertainty.”
The simple truth is that investors are shunning gold because they are getting better returns elsewhere, says Islam Elseedawy, financial adviser at Hoxton Capital Management. “Stocks and real estate look more attractive to investors as they tend to do well when inflation is rising.”
Stocks have delivered double-digit returns this year, so gold is going to lose its shine by comparison, says Oliver Kettlewell, head of fixed income and global portfolios at Mashreq Capital.
It remains the ultimate “fear investment”, performing well when times are tough. “It was one of the few asset classes to produce a positive return during the 2008 credit crunch and still has a job to do, he says.
Investors need a stable store of value and gold can protect you from the unknown turbulence to come
Jai Bifulco,
chief commercial officer, Kinesis Money
“Knowing exactly when crises are going to hit is extremely difficult, therefore holding a constant small allocation to gold is a better option than trying to time gold’s next rally,” Mr Kettlewell adds.
Gold could climb higher, just give it time, says Ole Hansen, head of commodity strategy at Saxo Bank. “Stagflation tends to support the gold price and with the [US Federal Reserve] set to tighten, the market may eventually have to rethink its negative view.”
Let’s not be too hard on gold, the price is still up 50 per cent in three years, says Andrew Hardy, director of investment management at Momentum Global Investment Management. “Having been prized since the early days of civilisation, it seems unlikely that gold will lose its allure anytime soon.”
It has one big advantage for investors, he adds. “From a portfolio management point of view, it has little to no correlation with other asset classes and so acts as a powerful diversifier.”
These are challenging times for gold and that is unlikely to change, says Vijay Valecha, chief investment officer at Century Financial in Dubai. “Markets are already pricing in two interest rate hikes from the Fed in 2022. This could keep the US dollar and Treasury yields elevated and weigh on the gold price.”
History shows that gold can stay low for years, but its time will come again, Mr Valecha says.
He has one eye on China, which faces the twin threats of a property sector slowdown and a Covid-19 Delta variant outbreak. “If we get another major correction, gold is likely to quickly resume its safe-haven status. The simplest way to invest is through gold ETFs such as SPDR Gold Shares or the iShares Gold Trust,” Mr Valecha adds.
Gold “continues to serve as insurance for unquantifiable, undiversifiable uncertainty in the global economy, finance and international relations”, as it always has, Mr Das says.
The precious metal may have underperformed lately, but investors should retain some exposure, typically 5 per cent or 10 per cent of their portfolio.
It might take time, but gold will shine again. That’s what it does.
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Killing of Qassem Suleimani
Planes grounded by coronavirus
British Airways: Cancels all direct flights to and from mainland China
Hong Kong-based Cathay Pacific: Cutting capacity to/from mainland China by 50 per cent from Jan. 30
Chicago-based United Airlines: Reducing flights to Beijing, Shanghai, and Hong Kong
Ai Seoul: Suspended all flights to China
Finnair: Suspending flights to Nanjing and Beijing Daxing until the end of March
Indonesia's Lion Air: Suspending all flights to China from February
South Korea's Asiana Airlines, Jeju Air and Jin Air: Suspend all flights
The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
Killing of Qassem Suleimani
MATCH INFO
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Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
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Key recommendations
- Fewer criminals put behind bars and more to serve sentences in the community, with short sentences scrapped and many inmates released earlier.
- Greater use of curfews and exclusion zones to deliver tougher supervision than ever on criminals.
- Explore wider powers for judges to punish offenders by blocking them from attending football matches, banning them from driving or travelling abroad through an expansion of ‘ancillary orders’.
- More Intensive Supervision Courts to tackle the root causes of crime such as alcohol and drug abuse – forcing repeat offenders to take part in tough treatment programmes or face prison.
More coverage from the Future Forum
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
