Investment CLINIC
I’M THINKING about investing in gold. How do I do this and is now a good time to buy?
PEOPLE typically buy gold in times of great uncertainty. The thinking is that it’s a physical store of value that holds its price relatively well, while currencies and share prices can fluctuate.
In the aftermath of the global financial crisis, the price of gold rocketed as savers flocked to this so-called safe haven.
The price per ounce rose drastically from $660 at the beginning of 2007, peaking at $1,837 in July 2011.
At that point, many investors sold their gold to realise healthy profits and the price dropped; it has since been hovering around the $1,200 mark.
Now it’s election time and once again savers feel uncertain. The possibility of no outright winner seems increasingly likely and some experts are fearful about what this could mean for the stock market.
In reality, that’s a short-term view. Even if there is a dip in the market, long-term investors should ride it out. However, if you are nervous about your cash, investing in some of the yellow stuff might provide some peace of mind.
Figures from BullionVault show the price of gold rallied to a 20-month high last week. Analysis of data over the past 50 years by the broker shows that historically the stock market falls most after a Labour election victory.
Adrian Ash, head of research at BullionVault, says: ‘Given the risks to sterling from this week’s election result and the ongoing debasement of the Euro, fear over currency values is a clear driver of strong demand for gold.’
Other than buying a gold bar and keeping it locked in a safe, there are two main ways to invest in gold.
You could buy a gold tracker fund that aims to follow the price of gold, much as a FTSE 100 t racker replicates the UK stock market.
An example of one of these is the ETF Securities Gold fund, which has total charges of 0.49 pc a year.
Or you could choose a traditional fund that invests in the shares of commodities companies such as Rangold Resources and Goldcorp.
But most of the available funds in this field have had a terrible time, some losing more than 50 pc of savers’ cash over three years. This is because the fortunes of these firms are not pinned to the price of gold, but are more to do with the costs of exploration and extraction.
IF YOU have an investment question get in touch at h.black@dailymail.co.uk or Investment Clinic, Money Mail, Northcliffe House, Derry Street, London W8 5TT.