Gold outperforms stocks and bonds as traders seek haven assets

Gold outperforms stocks and bonds as traders seek haven assets

Gold has made a positive start to the year, outperforming bonds and equities as skittish investors scour the market for safe places to park cash.

The metal, used by investors as a store of value in times of stress, has climbed more than 5 per cent this month and broken above $1,900 a troy ounce on Friday before easing back to $1,888.

The crisis in Ukraine has provided the impetus for the advance, although analysts reckon gold is also benefiting from concerns that US growth could slow as the Federal Reserve is forced to act aggressively to get inflation under control.

“The potential for a [inflation-induced] monetary policy error and elevated recession risks are providing support,” said Citigroup analyst Aakash Doshi, who thinks the yellow metal could hit $1,950 over the next three months.

Others are more bullish. Goldman Sachs believes gold could top its August 2020 record of above $2,000.

The US bank said the relationship between gold and inflation-adjusted “real” interest rates was starting to weaken amid concerns about the economic outlook and rising prices.

Typically, real rates are negatively correlated with gold. This is because higher interest rates make non-interest bearing assets such as gold less attractive.

But that has not been the case