Demand from family offices drives up gold price

Family offices are helping to fuel the price of gold which is continually hitting record highs, according to commentator John Authers of Bloomberg.

In a newly-published investment bulletin, he said family offices and high-net-worth investors are among a category of investors who have been actively trading gold futures.

They are allowing their contracts to be converted into physical deliveries of the yellow metal: “Worried about protecting the value of their fortunes, they are opting for the perceived safety of physical gold.”

According to Longview Economics, this could cause a price spike as swap dealers are forced to cover some hefty short positions by their own purchase of the metal.

Investment concerns which favour gold include the printing of money by governments desperate to refinance economies ravaged by Covid-19. The dollar is weak and interest rates are zero. Investors are also rattled by the spat between the US and China.

The current panic is overdone, according to many family offices. Deutsche Bank says the latest increase in prices has been steady rather than disorderly. If you take inflation into account, the price of gold remains below peaks achieved in 2011 and 1971.

But a technical shortage of metal in the futures markets could exaggerate future prices, as prices climb towards $2,000 an ounce – against a current $1,923 – putting the squeeze on the gold futures market along the way.