Talk of recession will prompt many investors to consider their gold
allocation. The precious metal is considered a safe haven and is accessible
on even a modest budget, from £117 for a sovereign. Mark Dampier, of
Hargreaves Lansdown, the independent financial adviser, says that about 5
per cent of an investment portfolio should be in gold.
The price has fallen from a peak of $1,000 an ounce in March to less than
$800. Some observers, including Mr Dampier, view this as an opportunity,
especially in the context of a weak pound and tension in the Caucasus. Here
Times Money looks at ten very different ways to get into gold.
Bullion
Small bars and bullion coins can be bought from dealers, such as Spink, at
about 5 per cent above metal value and sold back at the same rate below
value. This week Spink was selling 1oz Krugerrands for £470 and buying from
the public at £426. Dealers tighten margins for customers who buy or sell in
bulk.
Collectible coins
Gold coins with a value above their bullion content are an interesting option,
but not one recommended by Ben McLoughlin, bullion manager at Spink. He says
that the market is notoriously difficult for noncollectors to second-guess.
“If you do decide to buy, rare coins in excellent condition are the safest,”
he adds. “We are seeing strong interest in coins from Russia, India and
China, and in British Celtic coins.”
Jewellery
This has the advantage of being both decorative and wearable. However,
bog-standard new items come with a mark-up of as much as 300 per cent on the
gold price. Collectible items, either vintage examples or new pieces from
top designers, have greater investment potential and a value well above
bullion, but they are a speculative punt, dependent on volatile market
trends.
Exchange-traded funds (ETFs)
Gold ETFs track the gold price and offer what Gary Dugan, of Merrill Lynch,
the investment bank, calls “the easiest way to gain exposure to pure gold”.
ETFs are listed on the stock market, like shares, and can be bought through
a stockbroker, held tax-free in an Isa and incur much smaller fees than
managed funds.
Mining shares
Shares in goldmining companies provide geared gains over the metal price. This
is where a rise or fall in the gold price translates into a more significant
rise or fall in the share price. Several funds invest heavily in the sector,
notably the Black Rock Merrill Lynch Gold and General Fund. This has
delivered a return of 2,026 per cent since its launch in 1988.
Gold futures
These are high-risk investments available from stockbrokers. A futures
contract is a tradeable promise to buy or sell at a set price on a future
date. Investors put down a deposit of only 10 per cent, so can buy 100oz of
gold - the size of a futures contract - for the price of 10oz. Huge profits,
and losses, can be made.
An online option
BullionVault.com offers the chance to buy and sell shares of gold bars held in
secure vaults in Zurich, London and New York. The metal is held in the
investor's name - not in trust, as with ETFs. Transaction costs are a
fraction of those in the small-bar market, while storage and insurance costs
are 0.12 per cent a year, with a $4-a-month minimum. New users can sign up
for a free gram of gold to get a feel for the site.
Metal detecting
A decent switch-on-and-go detector costs as little as £200. Though this hobby
has gold-finding potential, base-metal items of archaeological interest, but
minimal monetary value, are far more common. All gold finds over 300 years
old must be declared as treasure trove and may be bought by museums at
market value.
Panning for gold
This will not make you rich, but it is a fun day out in some of Britain's best
countryside. The Museum of Lead Mining at Wanlockhead, Lanarkshire,
Scotland, has full-day courses tomorrow and on September 21, priced at £65,
including lunch and the necessary licence. The museum says that most
participants find a small amount of gold to take home.
Treasure hunting
Lost treasures include King John's treasury, which disappeared into the Wash
in 1216; two pirate caches on Cocos Island, off Costa Rica; and the cargoes
of several wrecks. An alternative to searching for such riches yourself is
to invest in marine-salvage businesses, such as Odyssey, which is listed on
the Nasdaq stock market.
Alternative safe havens for nervous investors
Cash: Dennis Hall, of Yellowtail, the independent financial adviser, says that
cash is the most obvious safe haven in times of crisis. “Spread your money
over the best-paying savings products on the high street,” he says. “If you
have a large sum, consider a money market fund.”
Gilts: Mr Hall also tips index-linked government bonds that pay a set rate
above inflation and can be purchased from the UK Debt Management Office (see
DMO.gov.uk) or through a stockbroker.
Index-linked saving certificates: These products from National Savings &
Investments offer tax-free returns and pay guaranteed interest at 1 per cent
above inflation over three and five-year terms.
Sin stocks: All equities carry risk, but one school of thought is that shares
in tobacco, alcohol and gambling companies, for example, remain resilient
during an economic downturn. Examples include British American Tobacco and
Diageo.
Diamonds: These have many of the properties that make gold such a popular
hedge and can be bought easily at Hatton Garden in London. The website of
the diamond consultant Martin Rapaport at Diamonds.net offers useful
information.
Case Study: Backing bullion
John Mathisen's finances suffered a double blow when he was caught up in the
Equitable Life pension scandal and then sold his travel business for less
than expected after the September 11 terrorist attacks.
The 67-year-old, left, is now a self-confessed “doom merchant” and views gold
as a financial sanctuary. Since 2006 he has moved £100,000 - a third of
his portfolio - into the metal with BullionVault.com. He says: “I looked at
other ways in but liked this site best, with its small spread on trades. I
also enjoy having real ownership of bullion.”
Mr Mathisen has since recommended the company to his son and son-in-law, each
of whom has invested.
