Gold prices have risen 22% so far this year as investors have piled into safe haven investments amid fears of a renewed global economic slowdown.
Spot gold started the year at $1,095.85 an ounce and hit an all-time high of $1,387.10 on 14 October as the US dollar slid to its lowest level in a year. Since then, bullion has come off its highs and traded around $1,336 today.
In terms of real gold prices – adjusted for inflation – we are still a long way from reaching the highs seen in 1980. Gold soared to a real all-time high of $850 an ounce on 21 January 1980 – $2,065 in today's prices – just after the Soviet invasion of Afghanistan at the height of the cold war, at a time when the American economy was weakened by high inflation and unemployment. Back in 1980, the US median household income was under $18,000 and new cars cost less than $6,000. The dollar was far more valuable then.
Suki Cooper at Barclays Capital said: "We expect prices to exceed $1,400 an ounce next year as a cocktail of factors ranging from central bank buying to potential further quantitative easing buoy prices. Until investors' fears about the shape of the economic recovery ease and interest rates pick up, gold prices are set to test new highs in our view."
