Investors turn to gold to beat inflation

Investors are putting more money into gold and other alternative investments due to high inflation and market volatility, new research from the Royal Mint shows. 

Alternative investments are usually defined as alternatives to traditional investment assets, such as bonds and equities. They can be anything from art to property, hedge fund investments, gold and gold funds, and digital assets. 

In a poll commissioned by The Royal Mint, over half (58%) of those surveyed currently hold at least one alternative investment in their portfolio. A total of 11% of respondents plan to increase their holdings, rising to 13% among Gen-Z investors.

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What’s more, some 36% of those who haven’t previously invested in alternatives say they would consider them in the future, according to the Royal Mint survey. 

There seem to be two main reasons why investors are looking to boost their alternative allocations. Two-thirds say they’re looking for better returns amid the cost-of-living crisis and a little more than half think alternatives will produce a better long-term return than equities. 

Gold holdings jump  

The Royal Mint says that investors were turning to precious metals and other 'safer' alternative assets to compensate for disappointing returns on traditional assets, such as equities. 

Its figures reveal a 17% increase in first-time precious metal investors in the first half of 2023 compared to last year. And demand has been growing among UK investors for ‘safe haven’ assets like gold for years. The Mint registered a 26% uplift year-on-year in the volume of gold investments during 2022, following growth in the previous years as well. 

“At the Royal Mint, we’ve seen an uplift in gold and silver investments in the first half of the year as investors turn to alternative investments as a means to diversify their portfolio, beat inflation, and generate wealth in the long term,” Andrew Dickey, The Royal Mint’s director of precious metals, says.

Gold, which is usually quoted in US dollars, also provides a hedge against sterling volatility. Since the Brexit vote in 2016, the pound has lost 9% of its value against the dollar, and during the Lizz Truss debacle last year, fell to near parity. As gold is traded in dollars, its value rises as the pound weakens. That’s one of the reasons that’s helped the yellow metal to a 10% annualized return in sterling terms over the past 40 years.