Gold – alongside diamonds – has traditionally been seen as a safe haven but do investors still see it this way. Senior bullion dealer at Gold Investments, Oliver Temple, examines whether there has been a change of attitude towards the precious metal recently.
When there has been volatility in the markets, investors have traditionally turned to the precious metal as a way of protecting their portfolios. We’ve seen this in the last few years in particular.
In 2006 and 2007 – just before the major economic downturn – many investors began buying the metal in large quantities. Indeed, the price for gold increased by a third during this time.
By 2008, spot prices had risen a further 25%, increasing to an all-time high of $1,030.80 in March of that year.
This year, there has generally been greater confidence in the US economy particularly with President’s Trump’s promise of increasing investment in the country’s infrastructure. Despite a few dips, largely because of the president’s policy announcements, the Fed is expected to increase interest rates over the next few months because of the stronger US dollar.
Gold does tend to do better if the dollar is weaker – investors feel there are better returns from other investments when interest rates are higher. That said, however, during the last economic downturn the lure of the US dollar still remained powerful.
This recent pattern appears to have now led some to question whether the commodity is still a safe haven.
Over the last four years, the precious metal has not reacted as many analysts had predicted. The metal over this period did lose around half of its value. This may have spooked some investors particularly as all the indications were there for the metal to have performed better – the Greece bailout situation and China’s falling shares.
But gold has actually done what it has always done. Cast your mind back to when Gordon Brown famously sold off over 50% of the UK’s gold reserves for just $200 per ounce. The prices then were at a record low and the country’s economy was growing steadily.
In the wake of the vote to leave the European Union last year, gold prices rose from £838 per ounce on 23 June 2016 to £983 per ounce.
Also reflecting this was the number of on Google searches for the term ‘buy gold’ which surged by 500% as soon as the leave result became likely.
Gold prices peaked at a three-year high of £1,062 in July 2016. At Gold Investments, we saw a huge demand around that time as well.
What Investors Look For
Investors wanting to hold wealth in the precious metal tend to look at several options. These are:
• Shares in gold mining companies
• Gold funds
• Gold bullion
• Gold coins
If we look closer over the last four years, it’s actually physical gold which has delivered the most solid performance.
As for gold being a safe haven consider this, buying one share is extremely risky and so is putting all your money into gold. Any investment can appear safe, if you buy and sell at the right point in the cycle.
It is also worth noting that one person’s safe haven might be another person’s worst nightmare. We advise not to make an investment decisions out of fear.
We strongly suggest that portfolios should include a mixture of investments not just gold. Gold, prices in the short-term can be volatile so we would say that the metal should make up no more than 10-15% of an investment portfolio. Most investors, particularly in the Asian communities, tend to hold onto their gold which they pass onto future generations rather like an insurance policy.
It does pay to talk to a reputable bullion house – such as Gold Investments – to tap into their experience. For instance, if you had £10,000 to invest in gold, you would generally be better off buying gold bars. Find out about Gold Investments secure storage facilities.
And when you do buy do make sure you are purchasing from a reputable dealer. Finally, there will also be demand for the metal. It’s still used in many industries such as dentistry and electronics.
Some investors have been spooked by the recent performance of the metal which is why some may have felt the metal was not a safe haven for them. In actual fact gold has reacted in the way it always had when there has been economic turbulence such as after the Brexit results in 2016.
Gold, if viewed as a short-term investment, can be extremely volatile. We would advise investors to take a medium to long-term view of the metal. And also we advise that investors should only have between 10-15% of gold in their portfolios.
About Gold Investments
Gold Investments is one of the oldest bullion dealers in the UK – trading since 1981 – and is still family owned.
With its handy office location near Leadenhall market in the City, investors are able to pop in conveniently to discuss gold face-to-face with senior bullion dealers. The bullion house can also buy gold as well.
What many of the Gold Investments clients like is that the team comes across as not only friendly but also extremely knowledgeable. They always give honest advice.
And customer care is at the heart of what they do. They also have a wide range of quality gold coins and bars and secure storage facilities which are available at their vaults at the London Silver Vaults.
They were also the first dealers to give the ability for investors to create live price alerts.
To discuss how the team can help you with your next gold investment, please get in touch today.
Gold Investments Limited
88 Gracechurch Street
London EC3V 0DN
Tel: 020 7283 7752
Fax: 020 7283 7754
Email: [email protected]