The time for gold to shine is now

Mark Pey, Director of Rush Gold, presents his latest commentary on why gold is positioned to be the last man standing in the current challenge of rising interest rates, inflation and slowing economic growth.

In comparison to the rest of the market experiencing downfalls, at the end of the June quarter gold is up 5% for the year and 11% year on year. Gold is doing its job.

The RBA’s predicted inflation rate rise to 7% by year-end may be wishful thinking, and inflation could be much higher. Globally we are seeing countries such as the UK already at 11%, and Estonia and Latvia sitting at a massive 20% annualised inflation.

These rises playing out globally reinstate Rush Gold’s opinion that investing is always a forward-looking exercise and gold fits the criteria of a top performing inflation hedge.

Gold bullion has the advantage in volatile times of not only being a hedge but also a currency.

History shows that gold performs well in times of a crisis. The 1970s oil shocks saw the price spike, as did the GFC and then COVID. The traditional asset class in volatile and/or bear markets has been bonds, especially government bonds. But the 30-year bull market in bonds has ended as central banks globally push up interest rates to curb inflation. It means bonds are currently destroying capital, not protecting it.

With inflation at 7% and maybe much higher, cash and terms deposits are no answer either. Although rates are rising, the return on capital is still well below the rate of inflation.