Difference and similarities

Sometimes major global events can affect every country, like the inflation surge that was born of the pandemic shortages, or the financial crisis of 2008 that impacted every corner of the world’s economy. But while these events serve to highlight globalisation, there also are different glide paths for economies around the world. In 2024, as inflation has receded across the world, the recovery in economic growth has been different across countries, with some recovering more quickly, while others are still trying to shake off a recession.

GDP growth

UN Trade and Development (UNCTAD) forecasts global economic growth will slow to 2.6% in 2024, just above the 2.5% threshold commonly associated with a recession. This marks the third consecutive year of growth below the pre-pandemic rate, which averaged 3.2% between 2015 and 2019. This global average is just that, an average, and give a general indication of the health of the economy around the world, but GDP growth will differ from country to country.

In the US, optimistic forecasts at the start of the year have begun to unravel as a trail of poor economic data puts the recovery on the back foot. In late April, US GDP figures showed growth had contracted to 1.6% in the first quarter of 2024, its lowest level for two years, and at the same time inflation rose to 3.4% in the first quarter of 2024, up from 1.8% at the end of 2023. The slowdown in GDP and rise in inflation were both worse than expected, and means hopes for imminent US interest rate cuts are fading fast.

The UK meanwhile fell into recession at the end of 2023 (two consecutive quarters of negative growth), and is struggling to turn the economy back to growth. Even though inflation is well below its double-digit highs of 2022, it is not yet down to the Bank of England’s 2% target.

At the start of the year, forecasts were optimistic about solid growth and an easing of interest rate pressure on borrowers. But as weak economic data mounts, the outlook for the year is slipping.

Housing and Property Market

Interest rates surged in 2022 and 2023 in response to the global spike in inflation, and this inevitably had an effect on property markets globally. So far, most major economies are not nearly confident enough in their economic recovery to start cutting interest rates to their pre-pandemic levels, in fact expectations for a rate cut in the US has been repeatedly pushed further into the future. It will happen, just not yet, and this change will dampen the housing market there. As recently as mid-April, the Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, slashed its forecast for the housing market, it now expects house prices to grow just 0.5% this year and next, compared with over 2% it forecast just last month.

In the UK the situation is equally mixed. Property prices fell throughout 2023 and year-on-year declines over the first three months of the year are a worrying portent for the rest of the year. There was a brief glimmer of change when average mortgage rates dropped at the beginning of 2024, but they have gone back up again which will inevitably affect affordability. There is still a cost of living crunch even as inflation has come down, and the Bank of England is in no rush to cut rates (most market watcher expect the first cut to come in the summer). Meanwhile the mortgage market is very precarious and the likelihood of a rebound in 2024 has receded.

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Employment prospects

On a global scale the employment outlook is worsening. The International Labour Organisation’s World Employment and Social Outlook 2024 said slowing GDP growth will lead to global unemployment rising to 5.1% this year. Of course there will be country-specific differences. Unemployment in the US, which is a key indicator when considering the health of the economy and hence when to cut interest rates, rose to its highest level in two years at the end of February, before dropping slightly in March.

In the UK, KPMG expects the unemployment rate to rise from 4% in 2023 to 4.2% this year and 4.5% next year. On the plus side though, wages are finally growing faster than inflation so at some point consumers will stop feeling so pinched. The pandemic changed the demographics of the employment market, forcing some workers out entirely and creating more opportunities for remote working for others. Across the globe, these changes are still impacting the job market, sometimes for the better, others for the worse.

Gold – A safe-haven investment in uncertain times

During the more recent pressures of the last century, from the great depression to world war, global economic shocks to the oil crisis, gold has often risen in value, but always at least retained its value over the long term even as inflation erodes cash.

With the outlook for the global economy still stagnant at best, declining at worst, physical gold investments offer safety and security over the long-term. Alongside its safe-haven properties that can protect investments from global economic shocks, gold is also a tax-efficient option. Investment grade gold is VAT exempt and specific gold coins including Sovereigns and Britannias are not subject to capital gains tax for UK nationals.

The gold price has made strong gains over the last few months, rising 10% in March alone and gaining over 16% in the last three months. The uncertainty of the economic and geopolitical environment has underpinned this rise, as buyers look to safeguard their investments from value erosion or market declines. Central banks are buying gold, and they have a clear purview of the global picture. It could be prudent to follow their lead as the optimism of early 2024 turns to uncertainty.

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We typically see this kind of leap whenever people fear that political instability is going to tip over into war. It happened when Russia invaded Ukraine and when Iran retaliated so strongly to Israel’s actions it kicked off a similar buying spree as the potential for this to escalate very quickly became apparent.

Of course, this is just one reason behind the gold price surge, but it’s a very powerful one considering the problems facing the world right now. Russia Ukraine is still rumbling on and Putin is making ever more threatening noises to the West as they continue to provide weaponry to Ukraine. There is no end in sight for the Israel Gaza conflict, and tensions are growing higher in the area. And the US isn’t exactly looking calm, with Trump now in his first criminal trial. What else is on the horizon?

The Doomsday driver

Gold is a safe-haven asset. Its rarity and immutability have made it a long-term store of value for centuries, and the advent of fiat currency and digital banking has only served to sharpen its safe-haven demand. When geopolitics causes uncertainty, investors want to protect their assets from whatever risk they foresee, like the banks going bust, currencies devaluing, stock market crashes. This doomsday mentality is a key driver of gold demand, and there has been plenty of uncertainty to choose from over the past few years.

The Russia Ukraine war caused the gold price to jump 18% in the initial stages of the war, fuelled by the concern that the local conflict could escalate to all-out war among the world’s superpowers. The invasion of Israel by Hamas in October last year also prompted a spike in the gold price, and once again the focus was on escalation. The continued tension in the Middle East, which is particularly sensitive to contagion fears, has meant consistent geopolitical pressure, contributing to the steady rise in the gold price for several months.

The attacks and retaliation between Israel and Iran in April added further fuel to the escalation fears, because it could be the touchpaper that prompts the US and other major global powers to get involved in the conflict. While the world’s superpowers have very good reason to want to avoid war, investors see a risk high enough to warrant increasing their allocation of gold.

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Central banks still buying

These geopolitical fears are being felt from the man-in-the-street to the highest rungs of power. Central banks have been strong buyers of gold for some time, and they buy it to protect themselves from the risks they see in the market, which include geopolitics as well as currency risk (when currencies dip or strengthen it can play havoc with reserve values). When the national banks of major countries like China buy up more gold reserves, it can be a strong signal for the gold market that even governments are looking to protect their reserves with physical gold. Central bank demand has been strong for a long time. The World Gold Council said that reported global central bank gold reserves rose by 19 tonnes in February, the ninth consecutive month of growth, led by China, Turkey and India.

Buy, sell or hold?

Throughout March and April, the gold price broke new barriers. Each time a new ‘All-Time High’ headline was published, it would be followed a day or week later with another. With gold up over 16% in just three months, is it still the right time to buy? And if you hold gold already, is it time to lock in profits and sell up?

‘Playing’ the market is a speculators game. Most people buy investments with the intention of holding them and reaping the gains of longer-term growth. Gold is a prime example of a long-term investment. There are inevitably fluctuations both up and down over time, but the trajectory over many centuries has always been up.

If you want to hold gold for the long term then you must expect it to reach new highs, because that’s what gold does, it rises in value over time.

‌If you’re thinking about liquidating, consider why now and if high prices are a good time to sell or if they will go on to break even more new barriers. Speculation is not the aim of the game in gold, instead it’s security. Gold is a hedge against uncertainty and volatility, it usually rises when other assets fall, and it provides very effective diversification for a portfolio. Right now, there’s plenty of volatility and uncertainty in the market.

All-time highs make great headlines, but they’re also just part of the trajectory of gold as its value grows steadily over the long term. Investing in a diverse portfolio that includes safe-haven assets like gold means you can enjoy the all-time highs as they happen.

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So why should you consider investing in physical gold within your pension pot, and what is the process?

Why gold?

One of the key characteristics of a good pension is diversity. As a long-term asset that is designed to increase over time, spreading risk is essential. Most corporate pensions consist of a selection of stocks, bonds and cash, matching the pension liabilities (expected pension payouts to pensioners) with their assets (how risky they are and whether they can be sold in time to fund the payouts). Some large pension funds more recently have started to include alternative assets like property, infrastructure and commodities in their portfolio.

So why should gold be one part of your pension investment?

If you have a Self Invested Personal Pension (SIPP) or SSAS, it is just as important to embrace the diversification principle that is the mantra of larger pension funds. This diversification principle works very well with gold because the yellow metal often moves inversely to stock markets or currencies. This means it can act as a balancing asset when other investments are underperforming, potentially reducing overall portfolio risk.

This effect is the result of gold being a safe-haven asset. As a long-term store of wealth, investors often turn to gold during periods of economic uncertainty and geopolitical tension. This flight to safety causes the gold price to increase in response to global events when other assets are often falling. It can be clearly seen during the global financial crisis in 2008-2011 and the pandemic in 2020, both of which led to record gold prices.  

Physical Gold And Pensions

Discover the benefits of investing in physical gold through your SIPP with our handy guide.

PENSION GOLD

Another key advantage of gold is that it often acts a hedge against inflation. Rising prices can have a negative effect on true pension values because you can buy less for the same amount of money. Many pension funds aim to manage this risk by targeting a larger growth than inflation, but when inflation surges into double digits like it did in 2021-2023 it is rarely possible for investments to keep up. The end result is a pension pot able to buy less than it did before inflation spiked.

As a commodity and a store of long-term value, gold usually rises in price alongside other goods. This creates a natural inflation hedge, allowing the value of the yellow metal to keep up with growing prices. It’s not a perfect relationship as there are many factors that affect the gold price, but over hundreds of years, gold has maintained its buying power as the value of cash has eroded. In 1920 an ounce of gold cost around £4.60. Holding onto that cash would only buy you a sandwich today, but that ounce of gold is now worth over £1,850.

It’s true you can hold ‘electronic’ gold in your pension fund through exchange traded funds and other stock investments that are exposed to gold miners. However, these investments are exposed to counterparty risk if the institution goes bust. Counterparty risk is present in almost all financial transactions, and holding physical gold in your pension minimises this risk.

How to Invest in gold in your pension

In 2006, the UK government allowed physical gold to be held in Self Invested Personal Pensions (SIPPs). The gold must be in the form of bars and a minimum purity of 995 out of 1000 (99.5% pure). The normal tax advantages of saving through a pension are that the government will provide tax relief between 20% and 45% depending on your tax rate.

The increase in the value of your gold over time is also accumulated free of capital gains tax, which in some instances can be as high as 28%. Not all SIPPs are enabled to hold gold so it’s worth checking which ones do ahead of any decision.

 Finding a SIPP that allows gold investment

Only some Self Invested Personal Pension (SIPP)’s enable you to invest in gold within them. So this is the first step in the process of adding the yellow metal to your portfolio. Your own SIPP may allow or even consider permitting physical gold as an investment .You will have to contact them to find out. A specialist gold broker, such as The Pietra Sussan Company, will have a list of suitable SIPP providers.

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Once you’ve a suitable SIPP provider, make sure you take professional financial advice before instructing them of your intentions to invest in physical gold.

Gold dealers cannot offer specific financial advice but a reputable dealer will be able to furnish you with procedural guidance. They can also help with facts about gold, its performance, what gold products are available. They can also advise on the timings of your gold purchase. Consider reputation, accessibility and security. Do some research and ensure they can provide you with the right level of information you need. Can they explain the types of gold available so you can make an informed choice about what to invest in? Will they store it on a segregated and allocated basis instead of pooled storage? And importantly – will they offer a Buy Back Guarantee? It’s important that your pension scheme is able to liquidate your gold quickly and easily. A guarantee from your gold dealer to buy back any physical gold purchased from them means this is covered already.

Transfer funds from existing pension to SIPP

Once your new SIPP is set up, and funds transferred, you would typically just complete a form (an instruction to purchase). This permits the SIPP provider to purchase a certain amount of physical gold bars. Funds are then transferred to your gold brokerage and you confirm the exact sizes and denominations of gold bars that you wish to purchase. It’s critical for quality, legitimacy and future resale that any bars that are purchased are from LBMA member providers. Once the allocation is complete – you are sent your paperwork (Transaction Invoice, Storage Agreement, Certificate of Authenticity), which would be in the name of your pension scheme..

Diversifying your pension assets is nearly always a prudent move. For a comfortable retirement, holding safe-haven assets like gold are a sensible way to help protect your future from volatility and risk.

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“I am pleased to share my positive experience with The Pietra Sussan Company regarding my investments in gold. I chose to invest in gold as I believe it to be true sound money that has withstood the test of time over many thousands of years, outlasting numerous currencies that have come and gone.”

“The Pietra Sussan Company has proven to be an invaluable partner in my investment journey. They have been extremely helpful, demonstrating a wealth of knowledge and providing me with the very best advice. Their guidance has been instrumental as I incorporate precious metals as a crucial component of my pension strategy.”

“I appreciate the professionalism and expertise exhibited by The Pietra Sussan Company, and I am confident in the security and stability that gold brings to my investment portfolio. Thank you for your ongoing support and sound counsel.”

Lee Stephens

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Gold Coins vs Gold Bars

One of the main differences between gold coins and bars is that bars tend to be bought in larger denominations. Although it is possible to buy very small bars of gold (there is even a one gram bar for sale), there is a cost to manufacture each bar and the smaller the bar, the greater the percentage of its price is the cost of manufacturing it. This negates one of the advantages bars have over coins – there is a lower cost of design – compared to the more elaborate coins minted with intricate designs which command a higher premium, or additional cost above the spot price of gold derived from design and manufacturing costs.

For this reason, bars are often bought in their larger denominations (kilograms or half kilos), but this introduces a drawback on the resale of the bar. You can’t split the bar once you own it. Which means if you want to liquidate your assets you have to sell the whole bar. As an example, a one kilogram cast gold bar is worth over £50,000.  

The most popular gold coins range in weight from a quarter to an ounce of gold. Customers have more flexibility when choosing to sell a specific amount of gold as opposed to having to sell more than they would otherwise want in physical gold. The one ounce Britannia gold coin will set you back closer to £1,700 and you can buy as many as you like and sell them as required.

While gold coins attract a higher premium because they carry an additional cost of the design of the metal, they are easy to store as they can be bought in smaller amounts.  In addition, demand for tax free gold coins is much higher than most other types of gold. This means they are easily liquidated.  

Both gold coins and bars manufactured to investment grade (a very high level of purity) are free from VAT, but only coins minted by the Royal Mint are also free from capital gains tax, depending on individual circumstances. This is because gold bars are not considered legal tender, and are therefore not a capital gains tax-free investment. 

Gold coins vs silver coins

Gold vs silver shouldn’t be an either/or decision because both precious metals have a place in a balanced portfolio, but for different reasons. Silver is much cheaper than gold so can be a good introductory investment with a lower capital outlay. But while silver is cheap it is more volatile than gold. Because it is less popular it is also less liquid, hence the price swings are more pronounced, more influenced by speculators. It often attracts buyers who prefer a short-term investment with quick upside risk, rather than a slow and steady long-term investment like gold.

The options for silver coins are similar to gold, including the Royal Mint-minted coins like Britannias and the Sovereign. Because these are classed as legal tender, they also don’t attract capital gains tax when sold. However, unlike investment-grade gold, silver attracts VAT unless it is stored outside the EU.

New vs old?

There are two distinct types of gold coin to buy. Bullion coins are minted in large volumes for investors and tend to hold their value close to the actual value of gold. Numismatic coins have value both for the amount of gold they contain and their rarity and condition. Numismatic coins are usually collector’s pieces which means when buying them you need to understand what is in demand, and have in depth knowledge of the numismatic gold coin market. Because they are rare, their value should appreciate over time, but they are harder to sell as the market is only to other coin collectors.

Alternative bullion coins

UK residents who want to take advantage of the capital gains tax exemption of legal tender coins are more likely to purchase Sovereigns, Britannias or other UK legal tender gold. But there are popular international coins which are of similar weight, purity and provenance that have good resale opportunities. Perhaps the most popular international gold coin is the Krugerrand. Minted by the South African mint, the Krugerrand contains an ounce of gold, although you can now buy quarter and half ounce versions. Its popularity during the gold bull market in the 1970s has cemented its place as an iconic coin and despite many other alternatives now being available, continues to be a popular investment.

The American Eagle and the Canadian Maple Leaf are legal tender gold coins in their country of origin. The former is minted at 22 carats and the latter at 24 carats. One special edition of the Maple Leaf gold coin is call ‘Five Nines’ because it is pure to 99.999% gold. There are many other gold coins available, but for investment purposes it is always essential to have a liquid buy-back market so the most popular coins are usually the most saleable.

The verdict

Which gold coins you buy will depend on your personal circumstances. If you are a UK resident and want to benefit from the tax-free aspects of gold coins, then Royal Mint-minted coins are both VAT and CGT-free. The size and quantity will again depend on circumstances, but the popularity of bullion like Sovereigns and Britannias means there is always a resale market so they can be very liquid. 

Numismatic coins require in depth knowledge of the collectibles market, and they are less liquid because the only other buyers out there are other collectors. However, depending on rarity, their value may appreciate beyond the actual weight value of the gold.

Ultimately, coins are a popular, easy entry into precious metals investment, and a prudent and liquid investment for any balance portfolio.

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What is the LBMA?

The LBMA is the key independent standards agency for gold. It sets and promotes the quality standards for products like gold and silver bullion bars, specifying the purity and appearance of the bars. These standards allow buyers to be assured the gold they purchase is the correct weight and purity, taking the risk out of buying gold.

The LBMA accredits companies and organisations globally from across the gold value chain, including miners, refiners, producers, traders and companies that store and transport precious metals. This is important because the entire process of producing, selling and storing gold must be assured in order for each gold bullion item to be standardised, verified and traceable (for ethical reasons).

The organisation maintains the Good Delivery list which are refiners whose gold and silver bars meet the stringent quality and ethical standards set by the LBMA. In addition, it fixes the gold price twice a day based on market demand and supply, and these ‘London fixes’ are used by everyone in the gold industry.

What does accreditation mean?

To even apply to become an LBMA member or associate member, three current members have to attest to a longstanding existing relationship with your business within the gold market, essentially vouching for your credibility. From this point the LBMA conduct a thorough vetting and due diligence programme before the application is considered by their board. This builds a picture of trust, which when added to the LBMA principles and business conduct rules, indicate that a business is a trusted participant in the gold market.

The LBMA principles cover integrity, skill, diligence and responsible management, and businesses must demonstrate that they have effective governance. These baseline requirements provide potential customers with assurance that the company they’re dealing with is trustworthy and safe to trade with.

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Why is this important?

The internet has made it easy to transact online but it has also made it easy to falsify identities or misrepresent organisations. That’s why doing your due diligence on the companies you transact with is essential.

Credibility is crucial when selling gold, most importantly because gold is a high-value commodity, and buyers need assurance of its purity, weight, and authenticity. Sellers with established credibility can provide this assurance, making transactions smoother and more secure. This assurance also mitigates risk, protecting buyers from counterfeit products, which is a real problem when buying from unauthorised sellers. The market for fake gold sales on social media is an ongoing problem.

Credibility assurance like LBMA accreditation also indicates that the seller is complying with the necessary regulations. Other accreditations like membership of the Royal Numismatic Society and British Numismatic Society demonstrate engagement in the field of coins and currency units. Keeping up with news and research in this area is an important part of the continued credibility of a company.

Many years ago, almost all customers had a relationship with their local store owners, but that personal connection has disappeared with the advent of retail chains and internet shopping. Now accreditations, customer feedback and reviews have replaced the personal recommendation. In the internet age, customers need to satisfy themselves that their transactions are trustworthy, and it’s all the more important for a high value item like gold.

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What is the ISA appeal and how is gold similar?

There are three main types of ISA, each of which appeal to different investment needs. Cash ISAs are essentially savings accounts that offer different interest rates depending on their flexibility (fixed term vs easy access); stocks and shares ISAs which invest in the stock market, and Innovative Finance ISAs (IFISA) which allow investors to lend funds through peer-to-peer (P2P) lending platforms.

The flexibility lies in the range of choice and the ability to mix-and-match ISAs. Half in cash, half in stocks? Some easy access and some locked up for higher returns? The opportunity to generate tax-free returns on a balanced portfolio is a no-brainer, the only question is what to do once you’ve hit your limit of £20,000 per year?

Gold – the other tax free option

Most investments attract tax on earnings. Gains on stocks, shares and bonds are taxed. You pay capital gains tax on second homes, art, collectibles, in fact any possession worth more than £6,000 that appreciates in value. And CGT has become more draconian recently. From last year, investors were only allowed to earn £6,000 in capital gains before starting to pay tax, less than half the previous threshold of £12,300.

So how can gold be tax free? The first tax advantage comes in the purchase of investment-grade gold, which is free from VAT. This rule only came into effect in 2000 when the UK government brought gold in line with other VAT-free investments like stocks and shares and harmonised with the rest of the EU which did not charge tax on gold.

So, there is no tax on investment-grade gold when you buy it and no tax when you sell if you invest in coins minted by the Royal Mint. This is because these coins are regarded as legal tender in the UK. It is a firm principle of UK law that we do not pay tax on the flow of currency, and therefore you do not have to pay tax on transactions involving Royal Minted gold coins. Other types of physical gold will attract CGT, including gold bars and foreign coins.

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How else is gold comparable to ISAs?

Not all ISAs are flexible, but if that is your priority when investing, then gold is comparable. Gold is a global safe-haven commodity that is in demand all the time, everywhere. Liquidating your assets, especially UK gold coins, which are at the top of the demand chain, is usually quick and easy, allowing you to take advantage of opportunities without waiting for assets that are tied up for long periods of time.

The costs are comparable too. Unless you choose to store it at home (when insurance should be your first thought), the main cost of owning gold is the cost of storage, which is generally comparable to the management fee costs of investing in an actively managed stocks and shares ISA.

Long-term growth

How much your ISA grows in value will depend on how you invest. A cash ISA will pay a specific rate of interest, while stocks and shares ISAs are dependent on how the market is doing at the time. Like most market investments, over the long-term you would expect your ISA to grow.

Gold doesn’t pay interest like a cash ISA, but it has always grown in value over time. Gold’s rarity and immutability are the key reasons behind its abiding value. It is estimated that over 200,000 tonnes of gold has been mined throughout all human history, which sounds like a lot but would actually only fill between three and four Olympic swimming pools when melted down. This rarity underpins its value, and gold has been traded as a form of currency for thousands of years.

So, while it doesn’t generate interest, gold has grown in value for centuries. In fact, since the turn of the 21^st century, gold has outperformed both market growth (stocks and shares ISAs) and savings growth (cash ISAs). £10,000 invested 20 years ago would be worth £14,424 if invested in a cash ISA, £35,795 if invested in the FTSE 100, and £70,710 if you had invested it in gold.

The perks of physical gold

Gold isn’t just useful because you’ve run out of ISA headroom. It also adds another dimension to your portfolio that even ISAs can’t add – protection from market volatility. Gold is a safe-haven asset, which means when instability or uncertainty are impacting the markets (for example at the outbreak of war or an unexpected financial crisis) investors will flock to gold to protect their assets, pushing the price up in direct counterpoint to the downward direction of stocks. Whilst your stocks and shares ISA will be exposed to this risk, your gold holdings act as a hedge against that risk.

So, it’s prudent to own both ISA products and gold as part of a diversified portfolio. ISAs are a great place to start your tax-free investment journey, and when you’re all maxed out, gold is a limitless, flexible, tax-free, long-term growth alternative.

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Every January around the world crystal balls are dusted off as experts publish their predictions on everything from coffee harvests to snowfall to litigation. As a key safe-haven investment, gold price forecasts are always keenly watched, and 2024 looks to be a strong year for the precious metal. Many of the experts point to three main drivers of gold growth, namely the expectation of lower interest rates, continued geopolitical tensions in the Middle East and Russia, and demand from central banks. After a record 2023 , most experts are predicting another bumper year for the gold price in 2024.

J.P. Morgan – Gold price to rally in second half of 2024

Investment Bank J.P. Morgan expects gold to reach $2,175 by the end of 2024, before rising to $2,300 in 2025. Initially, the bank sees gold retreating from recent highs while interest rates remain elevated, but the US Federal Reserve (Fed) is expected to start cutting rates later in the year. After rapidly raising rates between 2022 and 2023 in an effort to cool rampant inflation, central banks around the world are now looking to lower rates as inflation has eased. The cuts will come on the back of slower economic growth forecasts for 2024, as policy-makers cut rates to encourage people to borrow and spend, stimulating the economy again.

When interest rates are lowered, the interest or returns on savings accounts and bonds is lowered, and this increases the appeal of gold which doesn’t pay interest at all. The opportunity cost of gold (the potential benefits that an investor gives up by choosing to invest in gold instead of other financial assets) decreases when interest rates fall, encouraging investors to turn to yellow metal.

“Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” said Gregory Shearer, Head of Base and Precious Metals Strategy at J.P. Morgan.

Alongside the imminent rate cuts in the US and rising geopolitical tensions, central banks will likely continue to buy gold, supporting demand for gold this year, the bank said.

“Led by China, central banks have purchased more than a net 800 tonnes of gold in the first three quarters of 2023. J.P. Morgan Research estimates global central bank purchases for the year will hit 950 tonnes, with China remaining a significant steady buyer. This will exceed the amount purchased over the same period in 2022, which resulted in record demand.”

UBS sees 10% upside to gold price

Investment bank UBS’s gold expectations follow a similar logic to J.P. Morgan. Over the course of the year, interest rates are expected to start going up, and that will underpin the gold price. The bank expects the price to rise to $2,250 by the end of the year despite near-term volatility.  

UBS echoed other investments banks that have based their forecasts on the expectation that rate cuts from May will “put pressure on the US dollar and real interest rates, which should spark fresh demand, particularly from exchange-traded gold funds”. The bank also pointed out that geopolitical risks are another good reason to diversify or hedge with gold.

ING Bank sees new record highs for gold

ING Bank believes gold will hit fresh highs in 2024, after already setting new records in late 2023. The gold price hit a record of $2,135.40 on 4 December last year, when markets speculated that the Fed could start cutting interest rates early in 2024. While the price has retreated from those heady days as interest rate cuts edge further out, it was still above $2,000 an ounce in January. ING believes the gold price could hit fresh highs this year and predicts it will average $2,100 in the fourth quarter.

ING’s forecasts are predicated on familiar expectations – Fed rate cuts in the second quarter, a weaker dollar, more geopolitical uncertainty spurring safe-haven buying, and continued strong demand from central banks.

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World Gold Council bets on Central Bank support

The World Gold Council, an organisation that represents the gold industry and collects data on demand and supply of the precious metal, said in its annual gold outlook research that Central Bank buying and geopolitical tensions may provide support for the gold price in 2024. The WGC Gold Outlook 2024 presents a variety of scenarios depending on how the economy fares, and how that could affect the gold price. If the economy contracts (recession) gold tends to rise because people look to put their assets in a safe-haven investment while markets are volatile. If the economy grows, gold may coast along with little growth as investors seek returns elsewhere.

Whatever the actual performance of the economy in 2024, the World Gold Council believes there is support for gold from the volatility caused by geopolitical tensions and more Central Bank demand. Last year the WGC estimated that excess central bank demand added 10% or more to gold’s performance. “And they will likely continue buying. Even if 2024 does not reach the same highs as the previous two years, we anticipate that any above-trend buying (i.e. more than 450–500t) should provide an extra boost.”

 A chorus of bullish gold price predictions

It’s unusual to find such consonance among gold experts because there are so many factors that can influence the price of the precious metal. But investment analysts at many large banks agree that the outlook for gold in 2024 is good. Even with prices touching all-time highs as recently as last month, they still see room for more growth.

Saxo Bank said: “We maintain a bullish outlook for gold into 2024 in the firm belief that rates have peaked, and that Fed funds and real yields will continue to trend lower.” Meanwhile Bank of America said that gold could reach $2,400 per ounce in 2024 if the Fed cuts rates in the first quarter.

The main driver of this optimism is the expectation of rate cuts. But there are many other factors that could contribute to higher gold prices, including a falling dollar, geopolitical tensions and central bank buying. When all the crystal balls are saying the same thing, it’s probably time to listen.

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In a world of known unknowns and unknown unknowns, owning physical gold is one way to be absolutely sure your assets are safe from a digital Armageddon.

Increasingly digital

For Boomers and Gen Xers it’s still possible to remember a world without the internet, but technology has evolved to the point where today everything we do is connected. It’s almost impossible to go ‘off grid’, especially if your information is already in the cyber ether. The digital revolution has come at breakneck speed, and sometimes it hasn’t been possible to protect the information from nefarious actors.

There are a wide range of cyber threats that organisations face, from state-sponsored cyber espionage and sabotage to financially motivated data breaches and ransomware attacks.

For example, in 2017 the WannaCry ransomware attack affected more than 200,000 computers in 150 countries, encrypting data and demanding a ransom to release what was in some cases critical information, including essential data within the NHS. Sony, Yahoo, Marriott and Target have all had major data breaches that have compromised millions of customers and their sensitive personal, and often financial, data.

Of course, companies who are the guardians of our data spend billions to protect our information, but as data security evolves, so do the tactics used by cyber criminals. There is never going be a time when digital information is entirely safe and secure. 

Bank vulnerabilities   

Bank robberies have changed substantially over the last few decades. The teller heists of yesteryear have been replaced by digital theft on a much larger scale. The Russian Central Bank was hacked in 2016 and thieves made off with $31 million, while the Bangladesh Bank heist of the same year cost it $81 million in stolen funds.

Often though, the cyber-attacks on financial institutions don’t target actual funds, but personal data that can then be used to carry out criminal activity like identity or financial theft. The scale of data breaches, and the number of people affected is substantial. An attack on credit bureau Equifax in 2017 exposed the personal information of 147 million people, including Social Security numbers, birth dates, addresses, and, in some cases, driver’s license numbers.

In 2023 there were data breaches that affected 8 billion records, including information held by banks and financial institutions like Bank of America and Capital One.

Infrastructure

It’s not just companies that are vulnerable to cyber-attacks. Digital infrastructure like communications networks, energy grids, data centres, transport systems and financial systems are all vulnerable to threats like hacking, malware, ransomware, phishing, and denial of service attacks. In 2021, American oil pipeline company Colonial Pipeline suffered a ransomware attack that impacted the technology controlling the pipeline forcing it to halt operations. The company paid the ransom in cryptocurrency, and they were provided with a tool to restore the system, but it took some time to get back up and running.

The interconnected nature of modern infrastructure means these systems are more vulnerable to disruptions or attacks, posing significant risks to public safety and economic stability, and a breach in one area can have cascading effects on others.

Who is the enemy?

Digital anonymity makes it difficult to know who is behind some cyber-attacks. Are they criminals who use it for personal gain, state-sponsored attackers who carry out cyber operations aligned with the political, commercial, or military interests of their governments, or hacktivists who do it to further a political agenda?

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All of these organisations, individuals or governments have perpetrated cyber-attacks in the past and it is certain there will be more in the future. So, what does that mean for the people who have to deal with the ramifications of the attacks?

On an individual level they may need to contend with identify theft, fraud, financial loss and service disruption. But there could also be more widespread impact on economic stability (from infrastructure disruption), geopolitical instability (from influencing election outcomes or political decision-making), and market volatility (from compromised financial infrastructure).

AI – the known unknown

Organisations and governments spend billions on cyber security to try and prevent attacks and hopefully staying one step ahead of the cyber criminals. But the advent of Artificial Intelligence (AI) may make this harder, because the new technology brings both potential benefits and risks to cybersecurity.

AI’s capacity to process and analyse large volumes of data for identifying patterns and making predictions can be used to enhance the sophistication, speed, and complexity of cyber-attacks.

The threats are wide-ranging and potentially catastrophic. Malicious software may soon be able to adapt and change in order to side-step cyber defences. In sectors where AI controls critical systems, such as autonomous vehicles or medical equipment, cyberattacks could pose direct physical threats to safety. Misinformation can much more easily be produced and spread by deepfakes, convincing impersonations in videos or photographs that could have serious implications for personal reputations or political stability.

AI is still only in its infancy so the actual implementation of many of these serious cyber threats is currently theoretical. But not for long. We rely on the corporations that hold our data to keep it safe, or our governments to maintain the systems that keep society functioning effectively, but will they always be able to do this?

Protecting your assets

The digital revolution is relentless and often imperfect. While some people may have avoided online fraud or cyber breaches so far, the risk is always there. And if it does happen to you and information about your assets is compromised, you could end up losing a chunk of your digitally held wealth. We all hope it won’t happen to us, but like any insurance policy, it is worth keeping some physical assets in your portfolio just in case.

Physical gold, a tangible asset with no digital exposure, has been a store of value for thousands of years. Gold’s safe-haven status is recognised around the world. Investors can easily liquidate their gold whenever they need to, and it is often seen as an inflation hedge because its value rises alongside other goods. if you’re worried about how much of our lives are digital, invest in something you can see, touch and sell when you need to, invest in physical gold.

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CEO Josh Saul said: “The Pietra Sussan Company asks every client what motivates them in their purchase of physical metal and, interestingly, last year we saw the number of people referring to “a fear of counter-party risk” more than triple (a 327% increase). The counterparties they are worried about are banks, building societies, funds and even the counterparties to their other investments like company shares. The rapid increase in bank branch closures along with the share price slump at both Metro Bank and Natwest has contributed to a breakdown in confidence within the banking industry. 

“Our clients view the purchase and custody of physical gold as a way of moving wealth out of the banking system and into a physical asset that traditionally outperforms inflation but is capable of being liquidated extremely quickly. There’s also no tax to pay on certain physical gold investments depending on individual circumstances. The tax advantage is of particular relevance given the gold price has increased by 60% over the last 5 years. It’s also attractive for those that have already maxed out their ISA and pension contributions for the financial year.  

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“Some clients are focused on immediate volatility like the wars in Russia-Ukraine or the Middle East, while others are also looking forward, to both the UK and US elections later this year, and preparing their portfolio for more uncertainty by purchasing gold. This is especially relevant for our customers who are putting physical gold into their pension vehicles.

“Last year, The Pietra Sussan Company saw a 429% increase in people removing exposure to equities, property and cash within their SIPP/pensions in order to purchase physical gold bars within the same vehicle. Clients that want to retire early are acting on concerns that a fall in the value of their pension pot will mean that they need to work on average five year longer than planned, with some seeing little to no prospect of being able to retire at all.

“Physical gold provides investors with a safety net in an asset that tends to increase while other commonly held assets like equities or property fall in value. Our clients are not necessarily buying gold for growth. Rather, they’re focused on the precious metal’s history as a safe and secure asset that holds its value long-term, with growth as an added bonus.”

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