The plunging price of gold is an expression of hope by the markets

Gold is the ultimate hedge against bad stuff. If people are selling it, maybe things aren't so bad.

One of the big market stories of the day is the continued decline of precious metals. The price of gold is almost 20 per cent off its late 2012 high of $1,794 per oz, and a huge chunk of that fall has happened in the last two weeks – this morning alone, it's down 3.8 per cent and is still falling.

It's always tricky to read anything into market movements, unless they're as obvious a boom-and-bust cycle as something like Bitcoin, and that goes double for something like gold. It, and precious metals in general, have semi-unique fundamentals, because nearly all of their worth is tied up in the collective agreement that they are valuable. A bar of gold is worth money because everyone agrees it is worth money; contrast that with a barrel of oil, which can be used to make things and provide energy, or a share in a company, which might pay dividends.

But the price of gold isn't just driven by unpredictable speculation. The whole thing is wrapped up in beliefs about the nature of fiat currency, inflation, and macroeconomics. Joe Weisenthal explains:

On one hand you have established economists, who believe the government has tools at its disposal to address a crisis. These tools include deficit spending and a violent expansion of the Fed’s balance sheet.

Conversely you have critics who slam the arrogance of economists and central planners, and who have predicted that all of this economic acrobatics would result in an economic collapse, hyperinflation, and an explosion in the price of gold. Gold is important to their worldview, because it represents a quasi-money that’s not tied to any government or central bank.

Investing in gold is a rejection of government money and finance. Money flowing into gold-related assets represents a belief that rocks (however shiny they are) are a better place to invest than human endeavors (like stocks).

You can see this belief reflected in the tendency sites like ZeroHedge have towards showing things priced "in gold". So, for instance, the S&P priced in gold has been shrinking since 2000: the idea is that gold is still the only real money, and must therefore be the point from which all other observations are made. (Paul Kedrosky took this to its logical conclusion, charting the price of gold in gold)

But regardless of the reasons for the collective agreement that gold holds value, it does. And that means it has some properties as an investment vehicle. Traditionally, it's thought to be good to own in periods of high inflation and poor growth in the value of the stock market, and Paweł Morski points out what the logical conclusion of that is:

Gold – unlike bank deposits, equity or bonds, or even banknotes – is separate from the real economy: it’s what you invest in when you want to take a breather from what’s happening in the real economy. That’s actually only a sensible thing to do in pretty extreme circumstances. Gold returns are utterly crushed by equity markets in the long term – to a really astonishing degree for those economies where we have continuous equity markets.

Compared with shares in pre-revolutionary China or pre-war Poland, gold returns look pretty good. Gold is less an index of how confident we are that our leaders a) want to b) know how to do the right thing as it is an index of how sure we are that they won’t completely and utterly screw the pooch.

Also worth quoting is Morksi's absolute belter, because just look at it:

I have nothing to say about the Gold Standard other than it’s the obvious solution for those who feel the main problems with the euro are that it’s too flexible and covers too few countries.

Gold is an oddity, but the people who buy it say something very real about faith in the economic system. It may not be particularly good for hedging against downsides within that system, but as one of the few ways people can hedge against the total breakdown of order, it has a purpose. The continued slide, therefore, is a rare sign of hope in these beleaguered days. Some people, at least, think we're further from armageddon than we used to be.

Gold bars. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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