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,” 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.
“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.
“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.