Getting in on the gold rush: What soaring prices mean for investment

If Google searches are to be believed, we’re in a new gold rush – and it’s a global one. According to investment platform Hargreaves Lansdown, There were 271,500 Google searches for ‘gold’ in the first three months of the year.

This is the most popular quarter for gold since Q4 2020 – on the back of a rally in the gold price. In fact, gold prices hit a record high of $2,355 on 8 April 2024, as China continued buying for its reserves. But that’s not the end of the story by any means.

Many gold investors are expecting exponential increases in value in the medium to long-term as individuals, institutions and countries look for assets that give them security in an insecure world.

As Hal Cook from Hargreaves Lansdown puts it: “Real interest rate expectations (interest rates that account for inflation) have fallen recently because of the potential for interest rate cuts to continue, but there are fears that inflation might be more sticky and/or increase a little from current levels, especially in the US. Historically, the gold price has moved in the opposite direction to real rates, especially when real rates fall because inflation has increased. “

Why is the gold price going up?

As various Western economies – including the USA, UK, Eurozone and Japan – have been printing more money to cope with one financial crisis after another, there has been a growing concern among investors that fiat currencies are literally not worth the paper they're printed on. This has pushed more and more individuals and institutions towards gold, silver and other money metals.

China’s buying spree sparked this latest high in the gold price. It’s one of a number of central banks buying gold, and has been doing so for the best part of a year and a half. However, this is just one of many factors pushing prices up.

Right now, we are expecting interest rates to come down at some point this year. That would encourage investors to look elsewhere for value and returns. In the past, a drop in interest rates has generally been positive for stock markets but this time it doesn't seem to have had the usual positive effect on markets that such movements usually do. Also, although interest rates are expected to come down in the USA, in the UK and Europe, the view is, more and more, that they won't come down that much. This would mean that more people and institutions keep their money in high-performing cash funds for a little longer.

Geopolitics looking scarier

The current spike in gold seems to be very much the outcome of an increasingly uncertain and worrying world, with sabre-waving from different, volatile parts of the globe forcing investors to fly to safer, more solid assets than stocks or even bonds.

Precious metals strategist Nicky Shiels at the Swiss bullion refining and finance group MKS Pamp says "I really don't believe US data matters that much at this point, ...geopolitics is back as a new broader market driving development; it's been dormant for months."

Relations between Russia and Nato are particularly poor, according to Kremlin spokesman Dmitry Peskov who said last week that the Western military alliance is "already involved in the conflict surrounding Ukraine [and] continues to move towards our borders and expand its military infrastructure towards our borders."

Meanwhile in Iran, authorities marked Al-Quds Day by vowing retaliation for the Israeli airstrike on Tehran's embassy in Damascus, killing 13 people, including two generals in the Islamic Revolutionary Guard Corps.

Hal Cook says: “This will increase demand for Gold as it’s considered a ‘safe haven’ investment. Despite intensified efforts to demand a ceasefire in Gaza, the lack of any clear progress means concerns are running high. This has increased demand, which is supporting the gold price.”

Will gold keep going up?

It looks like it. The current geo-political uncertainty is not going away and, as John Butler recently pointed out in his Fortune and Freedom column, we also have a global financial system that is pretty much broken beyond repair. It's staggering along right now but it's only a matter of time before something crashes, somewhere. He mentions the growing global debt bubble and the broken financial system as major concerns for investors. "Authorities rarely talk frankly about this" he says "but some recent comments from the Bank for International Settlements – the central bank of central banks – suggest they are growing more concerned."

What should investors do?

According to John Butler "the only suitable action is to protect their accumulated wealth in financial assets with a meaningful allocation to gold. In the near-term, however, silver may actually offer better prospects due to tight liquidity and a growing supply and demand mismatch."

How do I invest in gold?

There are various ways to invest in gold, as we explain in this article. How you do it is up to you and what you consider to be least risky. Personally I think it's a good idea to have a mx of real and digital gold (and silver).

You can buy gold bars and sovereigns from various outlets including the Royal Mint and some high street sellers. Or you can open an account with Tallymoney or with Bullionvault to buy digital gold (and, in the case of Tallymoney, potentially spend it too).

If you buy physical gold you will have to store it and insure it, but digital gold comes with a monthly fee for administering it, so you take your choice.

Jasmine Birtles is founder of the money-making and investing site MoneyMagpie.com. Sign up to their free investing newsletter here.