Investors who have taken a shine to the idea of investing in precious metals such as gold and silver sometimes do not know where to start.
Such trading can be expensive and keeping gold bars at home is impractical and a security risk. However, you can now invest cheaply and easily without the worry that burglars might break in to grab your valuable investment.
The Pure Gold Company, BullionVault and the Royal Mint allow you to invest small sums without ever actually taking physical receipt of the gold, which is safely stored on your behalf.
What’s more, the Royal Mint has just cut its charges so you can trade gold, silver and platinum at minimum cost online, from as little as £20.
Making a mint
The Royal Mint’s director of bullion Chris Howard explained it offers absolute peace of mind as you know your precious metal holdings are safe: “Your gold is fully insured and physically held in one of the UK’s most secure sites at the Royal Mint precious metal storage facility.”
Trading fees on its Signature range have been slashed to just 0.33 per cent, plus an annual storage and management fee of 0.5 per cent.
Howard said you can invest in gold for a host of reasons – say for children’s university fees or property deposit, retirement or a rainy day: “You can invest little and often, which makes gold available to all, from novices to experts, the curious, the speculator and even portfolio hedgers.”
Gold has been seen as a store of value for thousands of years, but be warned, it can be as volatile as any other investment.
The price hit an all-time high of $1,917.90 (£1,455.78) an ounce in August 2011 when the euro threatened to implode, but has fallen by a third to trade at $1,275 now.
Another downside is that unlike a savings account, gold does not pay interest, nor does it pay dividends like shares do.
Darius McDermott, managing director at FundExpert.co.uk, said gold is the ideal way to mitigate the risks of investing in stocks and shares: “The gold price tends to rise in a crisis as investors rush out of shares and into safe havens, thus offsetting your losses elsewhere.”
Gold can also be a hedge against inflation or further falls in the value of sterling, and he recommended allocating 5 per cent of your savings: “You could increase this to 10 per cent if you are really worried about the stock market’s outlook.”
You can also get exposure to the gold price through a low-cost exchange traded fund (ETF), but McDermott warned that many do not actually buy physical gold and therefore do not offer the security that comes with actually holding the precious metal itself.
He prefers the actively managed Old Mutual Gold & Silver Fund: “The manager knows where the bullion is kept and even the serial numbers on the bars.”
Demand for gold surged during the Italian political crisis in May, with The Pure Gold Company reporting a 200 per cent rise in buyers.
CEO Josh Saul explained that many investors were buying for the first time: “There was a huge rise in Italian nationals worried about their country leaving the euro and a high proportion of financial services professionals looking for a hedge against further volatility.”
The price has since fallen but Saul said fears over eurozone stability, conflict in the Middle East and the slowing UK economy mean that gold could shine again.
Adrian Ash, director of research at BullionVault, said demand has temporarily weakened as Italian political fears recede, but the lower price could make now a good time to buy: “Lower prices might offer a contrarian signal for any investors considering an allocation to gold as financial insurance.”
Gold has an almost mythic status among investors, but you no longer have to be super-rich to invest in it. However, it is also vital to remember that gold does not glister all of the time.