Royal Mint: Gold boom likely as investors turn to physical gold

Recent banking scares have encouraged investors to turn to gold to protect their portfolios from volatility. Should you be looking to buy more gold?

Stack of gold bars
(Image credit: © Getty images)

Recent banking scares with the collapse with SVB and Credit Suisse, coupled with a fall in house prices, has triggered an increase in the number of buyers turning to gold investing to shield their portfolio from market volatility.

Latest data from The Royal Mint shows a 26% annual jump in the volume of physical gold purchases made last year - this jump in gold buying was primarily driven by millennials and Gen-z. Gold bullion purchases increased last year, with sales rising by 33.5%.

Gold started 2023 at a 9-month high in January and hit a 12-month high after events like the collapse of Silicon Valley Bank pushed prices higher.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues 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

Sign up

But following the collapse of SVB, gold prices reached highs of $2,000 (£1,603) on week commencing 13 March and the Mint saw a 230% week-on-week increase in sales of gold investments.

The Royal Mint, the gold buying trend is not slowing down with the demand for physical gold expected to continue in 2023.

Market uncertainty has certainly left many investors reviewing their portfolios and considering ‘safer’ homes for their money. Earlier this month, the Bank of England found that investors were flocking to NS&I to take advantage of the safety-net that comes with the government backed bank.

But for those looking to diversify with alternative assets, we consider whether physical gold is the answer.

Will the gold surge continue?

A poll of over 2,000 UK investors by The Royal Mint found there is almost certainly a growing trend to buy gold, with one in four investors (23%) saying they plan to invest in gold this year, rising to 26% among Gen-X investors.

Precious metals are the second most popular investment right now, only behind UK stocks and funds, with nearly a third of investors (30%) planning to invest in the asset class in 2023.

Nearly one in six investors (16%) who haven’t previously invested in precious metals plan to in the future, further highlighting the increasing popularity of the asset class.

The growing popularity of precious metals is, in many cases, being driven by the increasing investment appeal of the asset class as a potential means to protect portfolios in volatile markets.

A majority (53%) of future precious metals investors surveyed said they are motivated to invest by the asset’s ‘safe haven’ status, with many (29%) encouraged by the belief that the asset is less risky than other investments.

“It is clear from the data that investment risk is front of mind for UK investors, with many looking to add precious metals to their portfolios this year,” said Andrew Dickey, director of precious metals at The Royal Mint.

“We are seeing more investors consider, and invest in, precious metals as a potential means to protect their portfolios and attempt to navigate volatile market conditions. From our experience, gold and precious metals grow in popularity during challenging times for the global economy as investors look to diversify their portfolios and hedge against inflation,” he added.

Investors are ditching property for gold

With rising interest rates and falling house prices, investors are also looking at gold instead of property.

“We’re seeing people looking to reduce their exposure to European real estate, which is being affected by rising interest rates, increasing mortgage costs and significant cost of living pressures as inflation remains high,” says Josh Saul, CEO of the Pure Gold Company.

“In fact, a number of our clients are now looking to sell property and protect the proceeds in physical gold, where prospects for a stable and reliable return remain good.”

What makes gold a ‘safe haven’ asset?

Gold is considered a safe haven asset because it has historically held its value during times of economic uncertainty and market volatility.

The Royal Mint saw a near 26% uplift year-on-year in the volume of gold investments during 2022 as investors sought to protect their money amid a difficult year.

Unlike stocks and bonds, which are subject to market fluctuations and inflation, gold is often seen as a store of value that can help protect portfolios from market downturns.

During times of high inflation, gold is especially popular among investors because it is perceived as a hedge against rising prices, according to Dickey.

He said: “For many risk-conscious investors, these market moments are only a trigger for a long-term investment in precious metals that grows over many decades and retains what many see as its ‘safe haven’ status.”

How to invest in gold

There are many ways to invest in gold – from buying gold bullion to shares in gold miners and Gold ETFs. Take a look at our article on how to invest in gold for more information on how to get started if you are looking to add gold to your portfolio.

“Each way to invest has its own benefits so it is important to do your research and ensure this aligns with your own circumstances and preferences,” said Dickey.

Physical gold can be bought from distributors like The Royal Mint, as well as specialist gold dealers. Always check if the dealer is part of the London Bullion Market Association, which sets common standards across the industry and can help avoid scams.

Gold dealers make their money by selling for more than the spot price, so remember to shop around to see if you can find a better deal.

Dickey said more affordable routes, such as owning “fractional amounts via digital gold products like DigiGold” can be a good option for those who require a smaller amount of gold, or who prefer to hold the asset digitally.

MoneyWeek has always recommended investors hold gold – anywhere between 5% to 10% of their portfolio, due to its status as a “safe haven” investment.

Tom Higgins

Tom is a journalist and writer with an interest in sustainability, economic policy and pensions, looking into how personal finances can be used to make a positive impact. He graduated from Goldsmiths, University of London, with a BA in journalism before moving to a financial content agency. 

His work has appeared in titles Investment Week and Money Marketing, as well as social media copy for Reuters and Bloomberg in addition to corporate content for financial giants including Mercer, State Street Global Advisors and the PLSA. He has also written for the  Financial Times Group.

When not working out of the Future’s Cardiff office, Tom can be found exploring the hills and coasts of South Wales but is sometimes east of the border supporting Bristol Rovers.