Gold price WARNING: Savers urged against buying gold to defend against plunging FTSE 100
While the FTSE 100 has fallen more than 15 percent in the last year, the gold price has risen an impressive 30 percent. Over 20 years, the precious metal is up an incredible 476 per cent, rewarding long-term investors. Financial advisers say that most investors should have some exposure to gold, because it tends to move in the opposite direction to stock markets, rising when share prices fall, offsetting losses.
However, they also warn the gold price could fall back if coronavirus fears recede, and stocking up on gold today could backfire.
On Sunday night, the price touched $1,700 an ounce for the first time since February 2013, but it fell back slightly yesterday, as markets recovered.
Andrew Dickie, a precious metals divisional director at The Royal Mint, said it has seen its biggest week ever, with sales up more than 300 percent on last year: “Customers are allocating more precious metals to their portfolio as the stock market continues to plunge.”
The Mint also saw its largest ever single transaction as an investor purchased 1,520 gold Britannia coins, which will be stored at its vault.
Bullion Vault reported a similar record, with one UK investor using their smartphone to buy almost £1million of gold in a single trade.
Director of research Adrian Ash said that gold sales are rising as investors shun stock markets, higher-risk currencies and corporate bonds: “If central banks cut interest rates and try aggressive monetary easing, this will worsen the already poor returns savers get from cash, boosting the case for gold.”
Russ Mould, an investment director at AJ Bell, said you do not have to buy physical gold bars to invest in the precious metal, as you then have costs such as storage and security.
Instead, he suggests buying a low-cost exchange-traded fund (ETF) and tips the popular VanEck Vectors Gold Miners ETF.
One option is to invest in BlackRock Gold & General, which invests in gold miners and has returned 38 percent in the last year.
Chase de Vere chartered financial planner Patrick Connolly said that the big downside with gold is that it does not pay any dividends or interest, which means you are relying on price growth to make a return.
Gold has few practical uses and does not produce any income such as dividends or interest: “Essentially it just sits there, and the price depends solely on how much people are willing to pay for it.”
Once coronavirus panic ebbs, share prices could rebound and the gold price may crash, which means those who bought at today’s prices could end up nursing a loss.
Mr Connolly does not put any of his own clients into gold and said: “If you do invest it should not be more than 10 per cent of your total portfolio.”
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