Nothing cheers a gold investor more than the growing suspicion that the world’s policy makers are scrambling for answers.
The precious metal continued its remarkable ascent on Monday after a meeting of finance ministers from the Group of 20 major economies concluded over the weekend without arriving at a co-ordinated plan to revive global growth.
China underlined the urgent need for stimulus by cutting the reserve requirement for its banks, a move designed to encourage more lending in its slowing economy.
And just for good measure, Mervyn King, the former governor of the Bank of England, warned that the euro zone is doomed.
Gold’s rise reflects investors’ desire for refuge from the economic storm, according to Citigroup analysts. A recent weakening in the U.S. dollar has helped the metal, but “gold has also sniffed, through poor equity market trends, heightened risk in terms of global financial systemic risk,” according to Jon Bergtheil of Citigroup.
The metal has gained 16 per cent since New Year’s Day, making it the world’s best-performing major asset class so far this year. Among the forces driving it higher are the growing prevalence of negative interest rates, especially in Europe.
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