As I sat in front of my screen on Monday and watched the historic action of the stock market, I was glad I owned some physical gold.
I know it's a clich and I know it'll get me accused of fear-mongering, but we really do seem to be teetering on the edge of some kind of financial meltdown. Every day, a new set of rumours flood the market about another bank facing collapse.
So it's little wonder that demand for a real, solid, wealth-preserving asset that you can hold in your hand is going through the roof
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Owning physical gold is the best way to protect what you have
There are plenty of other ways to play gold, but none offer the same sheer reassurance that physical gold does. Junior mining companies are, for the most part, a form of speculation. They are not something you invest in to protect your savings. They are something you put money in to, hopefully, make more money. The same goes for futures and options. Exchange-traded funds (ETFs) are a handy means of getting exposure to the price of the underlying commodity, but they are not the same as owning the commodity itself.
Similarly, when you hold cash in a bank you are taking on individual company risk that's why you are paid interest to compensate. You are also taking on government risk, as all cash is a promise from and a belief in the government (and why hold significant savings in sterling with this lot in charge?).
Indeed, as this chart shows, measured in sterling, gold is touching all-time highs:
There is so much risk out there at the moment everywhere. Surely it's worth owning some bullion. And if it goes down in value, who cares? It means everything else you own will be going up.
Enjoying this article? Sign up for our free daily email, Money Morning, to receive intelligent investment advice every weekday. Sign up to Money Morning.
The demand for bullion is going through the roof
Certainly, plenty of people agree with me. There seems to be a massive rush to physical gold, as I noted in a recent MoneyWeek cover story (if you're not already a subscriber, subscribe to MoneyWeek magazine). This week we had the London Bullion Market Annual Precious Metals Conference in Kyoto, Japan. Sure, they have a vested interest in promoting this, but they say that demand for bullion is "unprecedented".
Jeremy Charles, chairman of the LBMA says, "There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career. The gold refineries cannot produce enough bars." Other executives report that the move into physical gold was unseen, and driven by the very rich.
Johan Botha, a spokesman for the Rand Refinery in South Africa, which manufactures the Krugerrand, the world's most popular gold coin, said the plant was now running at full capacity seven days a week. "Even so, now and then we have shortages," he said.
The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand. While the US mint suspended sales of the American Buffalo coin last week as it ran out of stock.
If you don't already hold some physical gold, I'd suggest you get hold of some. (To buy bullion, there are coin dealers such as Baird (www.goldline.co.uk) or Chard (www.taxfreegold.co.uk). There's also www.goldmoney.com, where you can have it stored in Zurich. I hear Bullion Vault (www.bullionvault.com) are good, though I haven't used them myself).
Our recommended article for today
An easier way to invest in wind
With high fuel prices and worries over energy security and climate change, alternative energy is on the up. But how do you choose which companies to invest in? Put your money into ETFs, and you get good exposure to a basket of stocks.
-
Who is the richest person in the world?The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
-
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
