Gold will not go out of fashion anytime soon

The price of gold has been under serious pressure over recent weeks, with heavy selling triggered by the fall in the oil price from its highs and the resurgence of the American dollar. Having hit $988 an ounce in mid-July, the price fell as low as $773 a month later.

Is it time to abandon the yellow metal? Absolutely not, in my opinion. I continue to believe that no investment portfolio is properly diversified without a portion sitting in gold – and that is especially true when both the global economic and political outlook is as uncertain as at present. Against that it is important, we have to take account of the fact that demand for gold around the world is proving very volatile.

Recent figures from the World Gold Council showed global demand dropping 19 per cent during the second quarter.

India, the world's largest consumer, saw demand fall 47 per cent year on year; the Middle East, meanwhile, recorded a 12 per cent fall. Yet anecdotal evidence points to a sharp near-term recovery in demand. The simple fact that prices have dropped will encourage buyers – especially in India ahead of a string of festivals from October onwards.

As for oil and the dollar – both very important considerations when looking at gold – we have seen a price adjustment, but we have yet to see a trend.

The United States currency is not 'fixed'. Oil is not going out of fashion. Neither will gold.