News Archive - August 2009
Golden returns?
10/08/2009When the world economy is in crisis, people often revert to investing in gold as a safe haven. It is a tangible, indestructible asset which is easily bought and sold and is seen as a store of value when times get really hard.
The price of gold reached $1,000 per ounce in March. It has quadrupled in value since 2000. So is it suitable for everyone?
There are a variety of ways in which a small investor can invest in gold. You can buy actual gold (bullion or coins) which you can either keep yourself, you can invest in gold which is held for you and stored securely. For more sophisticated investors there is the option of investing in gold futures or ETFs (Exchange Traded Funds) which are linked to the price of gold.
You can also invest in unitised funds which invest in the shares of gold mining companies, the best known being Blackrock Gold and General. However, this fund's value is not directly linked to the gold price so you could still lose money even if the gold price rises. The funds's price is extremely volatile, meaning that the timing of your investment can have a massive effect on the returns you experience.
Gold has certainly provided strong returns over the medium term. However, its price can be very volatile in the short term, making it much more of a gamble if you are not planning to hold it. It is priced in dollars, which can affect returns for a UK investor if the exchange rate is unfavourable.
For those with a larger portfolio, investing a small proportion of your portfolio (up to 10%) in gold is a worthwhile way of giving some diversification and protection against global economic crises.
It goes without saying that you should always speak to an independent
adviser before taking this sort of step.