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ANALYSIS: Go for gold amid political chaos and reinflation

Rising inflation, the US missile attack on Syria and new tensions with Iran, North Korea and Russia have all helped to bring gold into play in recent weeks.



Other than a sharp dip in March – now reversed – the precious metal has been on a roll this year, gaining 8.7% to reach $1,249.7 per ounce yesterday (April 10) afternoon.

Investors may be inspired by the fact prices remain below their peak at $1,360.1 per ounce that were seen last July, driven in large part by Brexit bearishness.

Today’s level is also a far cry from the price of $1,826 seen as the financial crisis and central bank easing dominated minds in 2011.

Gold is a relatively unique investment in that it delivers no yield.

The metal is increasingly used in engineering thanks to its high conductivity, but aside from that its only real-world application is as a decorative object.

Its most important quality for investors is that it can be a diversifier.

Gold can provide a port in a storm as global investors flee risk markets like equities and bonds. Its price changes tend to be less correlated with those seen on capital markets, and it can provide a hedge against bad news.

The evidence suggests wealth managers’ weightings to gold have tended to rise in recent months, with ETF Securities reporting gold ETF inflows of $41.9m last week alone, trouncing all of its other product sectors.

BlackRock’s ETF colossus iShares put global gold ETP inflows at $160m in the week ending 31 March, following a period of generally positive flows since the start of 2016.