the sharper investor; with Nigel Hibbert, Partner at Cheviot Asset Management, Liverpool.
The price of gold hit a new record high last week, nudging $1,600 an ounce, following an incredible, almost implausible eleven days of gain and leaving investors with that age-old conundrum - stick or twist.
On the one hand, with members of the Eurozone seemingly taking it in turns to ask for financial aid, there is no end in sight to the instability which continues to drive gold prices as the commodity takes on the veneer of a shining safe-haven during staggeringly uncertain times.
Gold has been a remarkably consistent performer in the current low real interest rate environment. The yellow metal has returned an average 16% since the start of its secular bull market in 2001, since when savers have seen a negative return on cash in real terms. Until interest rates rise and investors are concerned once more with the lack of yield in bullion, gold's role as the only asset outside of the debt cycle, free of counterparties, looks set to continue.
Analysts are broadly in agreement that there's no crash in prices immediately round the corner, with many predicting prices will remain high until next year at least and with some even predicting an overall rise - with peaks and troughs - over the next five years.
That's partly a result of global uncertainty but also a consequence of the prospect of further stimulus packages (ie quantitative easing). If governments are printing money, say, at the rate of 10% a year, then gold will arguably rise in value in a parallel fashion.
With good reason, investors are wary of currently flighty currencies and Standard Chartered's Hong Kong-based head of metals and mining has even been so bold as to predict gold prices soaring to a stratospheric $5,000 by 2020.
You can invest in gold in a number of ways - by buying the stuff itself (sovereigns, Krugerrands or gold bars), or by investing in shares in gold mining companies or in gold funds.
Buying actual gold products comes with storage risks and costs (including insurance) and you pay an additional premium if you want to buy coins. Mining shares (with companies which are set to increase production) can be a good hedge against a fall in the price of the commodity itself. Exchange Traded Funds (ETFs) are another route but we would stress caveat emptor where the ETF does not have underlying physical backing of gold.
in association with So no bubble or imminent crash, then, and still a good investment in troubled times. In fact, I'd go further: gold to rise to $2,000 an ounce within the next 12 months and, if the Eurozone starts to fragment, then prepare to see even more dramatic rises.
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|Publication:||Daily Post (Liverpool, England)|
|Date:||Jul 25, 2011|
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