Charles Stanley Direct: Explaining the gold spike

Reaching a record high

The gold price has hit a record high yesterday (4 December) amid geopolitical uncertainty, a possibly weaker US dollar and potential interest rate cuts next year.

But is it worth adding gold to a portfolio? What is driving the gold price now? Although gold is seen as a form of protection for investors, it competes with other assets. When interest rates are high and rising, some investors are minded to sell gold - which pays no interest - and buy assets that do. At these times higher yields available in bonds, property or even shares will tend to represent more appealing options, as do higher interest rates on cash. However, as investors look towards interest rate falls, as perhaps they are doing now, they may envisage a period where the...