buy gold, as fears of inflation rise By Harry Wallop,
Consumer Affairs Editor
Published: 5:00PM BST 12 Jun 2009
investors are buying gold in an attempt to protect themselves
against a rise in inflation, trade figures indicate.
from gold brokers suggest that small investors are buying
up physical gold, such as bars and coins, as well as so-called
"paper gold", such as shares in gold companies and
gold funds in far greater quantities than a year ago.
Gold Money is a company that allows investors to buy gold
bars or stakes in the bars, which it then stores in vaults
on clients' behalf. A year ago it held $352 million worth
of customers' gold in its vaults. This has nearly doubled
to $694 million by the end of May.
Gold: sales increase
as private investors
hedge against inflation
These figures echo official data, which suggests
demand for gold has increased substantially over the last
12 months, with some fears there could even be a shortage
around the world.
This is despite the global recession, which has pushed down
the demand for jewellery, especially in India, the biggest
gold jewellery market in the world.
According to the World Gold Council, retail investors around
the world bought 131 tonnes of gold in the first three months
of this year, an increase of 33 per cent.
The main attraction for investors is that gold is seen as
the ultimate hedge against inflation. While the pound or dollar
may lose their value, depending on the fortunes of the economy,
gold historically goes up in value when inflation gathers
pace. That is because everyone from market traders to high-powered
investors would prefer to be paid in gold when cash starts
to lose its worth.
Many fear that inflation will shoot upwards later this year
or next as a result of the extra money that has been pumped
into the economy, following the quantitative easing programme
undertaken by the Bank of England.
Currently inflation, as measured by the Retail Prices Index,
is running at -1.2 per cent. But most experts believe this
deflation will soon change to inflation.
Daniel Wills, senior analyst at ETF Securities, said: "Inflation
is starting to loom large. Historically, high inflation is
associated with high returns for gold.
"It is a key safe haven, a safe store for wealth when
paper money decreases in value."
His company's gold inflows – the amount customers are buying
– has doubled from $770 million a year ago to $1.5 billion.
The gold price, while very volatile, has climbed from $870
a troy ounce in April to $950 this week.