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Gold. In N S & I's Newsletter

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A golden way to invest?

As the global economic outlook remains unclear, some investors are seeking financial refuge in one precious metal – gold. In early September 2011 the price of gold was at a record high and despite recent falls in value, it seems that for many, this apparent ‘safe haven’ investment is proving too good to resist.

Should you invest in gold?Gold is seen as an attractive investment for many reasons. On a basic level, it has the reassurance of being a tangible commodity and the demand for gold always seems to outweigh its strictly limited supply – leading to an increase in value. Unlike an investment such as property, it’s also very liquid. In other words, it’s easy to buy and sell and this has an appeal to investors.

Growth or bust?

Although the value of gold has risen steadily throughout the last two years (peaking at a record high of approximately £1,229 an ounce in early September 2011) prices have fallen by 20 per cent throughout the second half of September. Consequently, experts are divided about where the price of gold will go next. Given the continued Eurozone instability and the downgrading of the USA’s credit rating to AA+, some believe that the value of gold will rise again. Others argue that gold is the ultimate bubble investment, prone to rapid growth followed by a sharp decline in value as the bubble bursts. Gold may be considered to be a safe haven investment but historically its price has always been volatile. On account of this fact, it is an investment that carries a certain element of risk.

How to invest in gold

Before you do anything, it’s worthwhile familiarising yourself with the wide range of investments available to you. This is because there might be a safer investment out there better suited to your needs. NS&I is backed by HM Treasury, so all our savings and investments are 100% secure. Visit nsandi.com and see for yourself. You can also learn more about alternative investments at investments.net

If you do decide that gold might be the investment for you, there are some issues that you may want to consider. Even if you have some knowledge of gold as an investment, do you know the best way to buy it? Generally, gold is bought in bars or coins. However, for most people buying a bar of gold bullion is impractical. Larger bars in particular are quite difficult to sell on, as there is a limited market of specialist bullion dealers. Some people may also want to cash in a part of their investment and it can be problematic to sell just a portion of the bar. This is why smaller bars carry a premium over larger ones.

If you choose to buy gold coins, these will usually be sovereigns or Krugerrands. However, it is the former that are seen as more attractive to UK investors. Essentially, this is because they are a coin of the realm and, as such, any profit made when they are sold is free of Capital Gains Tax . Sovereigns are also roughly a quarter of the weight of a Krugerrand, so they cost less per coin to buy. The history and design of sovereigns can also have an effect on their value, with particularly rare coins being worth even more.

There are ways to invest in gold without having to physically hold any of the gold itself. You can invest in Exchange Traded Funds (ETFs). These work in the same way as standard tracking funds, following the price of gold as it rises and falls. There are a huge number of gold ETFs available, so you should consult a financial adviser to help find the one best suited to your needs.

You can also invest in allocated and unallocated gold accounts. The former is effectively like keeping gold in a safety deposit box and it’s the most secure form of investment in physical gold. In unallocated accounts, investors do not have specific bars allotted to them and the bank reserves the right to lease the bars out. You may even want to consider investing in gold mining companies. However, the value of your investment will depend on other factors than just the value of gold, such as how well a particular mine or company performs.

Consult a professional

If you are buying gold, you should only do business with a reputable dealer. You can find a comprehensive list of dealers by viewing the ‘Where to buy directory’ on the World Gold Council’s website or visiting the London Bullion Market Association website. If you are buying large quantities of gold, you will need to think about storage and insurance as well.

Opinion may be divided on where the price of gold will head next, but we hope you now have a clearer picture of whether it might be the right investment for you.

A key moment for gold's price?

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I think so....now we are at the "Delusion" phase of the bubble lifecycle so collapse can't be far off now


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I'll start to believe the bubble is nearing the top when I hear the clapham omnibus full of chatter about buying it. At the moment, it is still full of people SELLING their old gold to shysters in shopping centres....

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When to Exit Gold these are my suggestions.

1. Positive real interest rates these should account for CPI manipulation, interest rates were raised aggressively around the time the gold Bull Run in the 1970’s ended.

2. DOW/Gold ratio below 2, it may go lower than 1 as this crisis is worse than the 1970’s

3. Average UK house price around 75oz

4. Share dividend yield above 6%

5. Signs of mania, TV, adverts selling gold as a sure fire investment, queues at coin shops.

6. A parabolic price move – in late 1979 into 1980 the gold price nearly doubled in 6 weeks to what seemed at the time a ludicrous price of $850.

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  • 276 Brexit, House prices and Summer 2020

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