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By David Byers

The prospect of an American and British bombing campaign in Syria and the continuing threat of a US-China trade war has led investors to rush for the security of gold in record numbers this week, propelling the price of the precious metal to an 11-week high.

The Pure Gold Company, a buyer and seller of gold, registered a 69 per cent increase in investment in gold on Wednesday, compared with the daily average. On Thursday Sharps Pixley, the London-based bullion dealer, reported a 253 per cent year-on-year increase in sales of gold, with sales in its showroom of £9 million in March, up from £2.5 million at the same time last year.

The appeal of gold bars and sovereigns for nervous investors has been growing steadily for weeks, since the diplomatic fallout from the poisoning of Sergei Skripal, the Russian former spy, and his daughter, Yulia, in Salisbury. By the end of last month customers of Bullionvault, the world’s biggest online gold trader, owned 38.8 tonnes of gold, worth £1.2 billion, which is equal to one eighth of the UK’s national reserves and a record total for the company.

Why gold?

Gold has always been a “hedge against catastrophe”, says Laith Khalaf, a senior analyst at Hargreaves Lansdown, the investment manager, because it isn’t subject to currency volatility and is protected from political turmoil.

“Recent threats from President Trump to fire missiles at Syria have led the gold price in the US to reach new highs,” says Daniel Marburger, a director at the gold trader Coininvest, based in Frankfurt. “This week started with an increase in sales of 30 per cent compared with last week, which shows how sensitive investors are at the moment.”

Coininvest says that there has been a 25 per cent year-on-year increase in the sales of its gold sovereigns, driven by the slump in cryptocurrencies and by global political tensions. Growing sales of gold helped to raise the price to the 11-week high of £964.24 an ounce on Wednesday, up £57.75 an ounce since the start of the year.

Most American investors cite concern about Mr Trump’s policies as the reason for their investment, while British investors are worried about further devaluation of the pound amid Brexit-related economic uncertainty, and a decline in the value of their property.

“Property market risk is a recurring concern for many UK buyers of gold,” says Josh Saul, the chief executive of the Pure Gold Company. “Our clients are not necessarily looking for growth in the gold price, rather they use the precious metal as a hedge against risk, knowing that an increase in the price of gold usually means losses elsewhere in their portfolio.”

What can I buy and how do I store it?

You can buy gold in bars (ingots) or in coins (sovereigns). Most Britons who shop with Coininvest buy 1oz Britannia gold coins (worth £992.73 at the time of writing) or Sovereign Elizabeth II gold coins (£237.86). Dozens of other coins are available, however, including a 1oz Perth Mint Gold Swan, worth £1,252.06. Sovereigns are exempt from capital gains tax.

Gold bars are available in many forms, ranging from Perth Mint 10oz bars (costing £9,768.56) to Johnson Matthey 1kg bar (£28,287.94) You can compare prices online at sites such as goldprice.org. Most people buy gold online and have it stored in a vault, but you can have it delivered to your home.

Are there disadvantages?

Gold is the ultimate “rainy day” fund, and shouldn’t occupy more than a small slice of your portfolio. Hargreaves Lansdown recommends a maximum of 10 per cent at any time.

“Gold performs when inflation is rising or interest rates are falling,” says Andrew Rees, an investment manager at EQ Investors. “It is not an ‘investment’ because there is no value being created and no yield available,” he says. Speculation that interest rates in Britain could rise next month is likely to reduce the appeal of gold once more and lower its price.

A study by Glint, an app that allows you to load an account with sterling, convert it into gold and back to pounds, found that the value of gold had appreciated faster than sterling over the past 20 years. If you invested £100 in gold each month over that period, it found, you would have £50,000 of gold, compared with £24,000 of cash.

What can I do with it?

Gold is for storing and changing back to currency when you want to spend it. You can’t go shopping with gold. However, tech innovators are trying to change this. Glint allows you to buy and sell gold live on its app. This enables you to use it for everyday purchases such as a cup of coffee, although it is fiddly and critics say that it contradicts gold’s purpose — not to be bought on impulse, but as part of a long-term financial plan.

Source: The Times

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