Gold Returns to Favour as Risks Rise

Gold is back in the spotlight after an increase in geopolitical risks says Julian Chillingworth, CIO, Rathbones

External Writer 9 October, 2017 | 1:44PM

Morningstar's "Perspectives" series features investment insights from third-party contributors. 

Gold has been used as a form of currency and store of value since long before paper currency was invented and adopted across the world. Today this precious metal divides opinion among investors like few other asset classes. At Rathbones, we prefer to simply examine the evidence and assess its properties.

It is often touted as a hedge against inflation. Yet our analysis shows that what really matters for gold prices is the level of real rates — the difference between the stated rate of interest and the prevailing rate of inflation. As real rates fall, either due to a rise in inflation or a fall in interest rates, gold tends to appreciate and vice versa.

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