Gold - Safe Haven

Savers worried about rising inflation, shrinking sterling and dismal returns on bank deposits are seeking a safe haven in gold.

Bullion pays no income and, after storage costs, can be seen to have a negative yield but it has delivered much better returns than shares during the last decade – and has a history of doing particularly well in election years.

While the FTSE 100 remains below its level 10 years ago, the sterling price of gold has soared by more than 320 per cent to £745 at which individual investors can buy today. That is lower than the record of £754 it hit earlier this month but gold bugs claim there are good reasons to expect a recovery.

Adrian Ash, head of research at BullionVault, said: “This week’s inflation figures show that savers in bank deposits have been hammered.

“With the Retail Prices Index (RPI) rising at 4.4 per cent in the year to March and Bank of England base rate frozen at 0.5 per cent – and many bank accounts paying less than that – cash savers have lost nearly 4p in the pound during the last year in terms of reduced purchasing power.

“People say that today’s low interest and inflation rates mean things are not so bad for savers as they were 30 years ago. But the net outcome is the same.

“In 1980, base rates were at 17 per cent and the cost of living was rising at 21 per cent. Just like in those bad old days, cash savers today are losing 4 per cent a year.”

Buying jewellery as an investment is a waste of money because of massive price differences at which it can be bought and sold. Baird & Co, Goldmadesimple and BullionVault are among dealers seeking to meet new demand from individual investors.

Baird will sell investment bars as small as 2.5 grams for £77.75 each or one ounce gold Tigers in presentation boxes at £799.50. BullionVault offers to sell gold online at £23.16 per gram, some £744.56 per ounce. Its dealing commission is 0.8 per cent on purchases and sales up to $30,000 giving a 1.6 per cent...