The Pure Gold Company said the number of first-time investors buying gold bars and coins has jumped by more than 700 percent in a single week. Gold has been a store in value for more than 4,000 years so it is no surprise that demand is rising as economic fears mount, but should we really be rushing to buy it?
Josh Saul, chief executive of The Pure Gold Company, said there are good reasons to be nervous right now. “The end of furlough, the ongoing petrol crisis, HGV driver shortage and intermittent empty shelves are stoking fear of more chronic trade disruptions.”
He said inflation is set to climb even further, while the end of the furlough scheme could push unemployment levels back up.
The Covid pandemic, Brexit, US politics, economic and banking worries, currency concerns and geopolitical tensions all add to a strong buy case for gold right now.
“Our clients are looking for a safe-haven asset that will protect their wealth amidst growing uncertainty,” Saul said.
Many will have heeded a terrifying new warning by author and investor Robert Kiyosaki, who says the stock market is heading for the “biggest crash in world history”.
Kiyosaki, author of “Rich Dad Poor Dad”, said the meltdown could even happen this month as indebted Chinese property developer Evergrande risks triggering a global stock and property crash.
Traditionally, gold rises when share prices fall, so holding some in your portfolio could help offset your losses if Kiyosaki is right about the forthcoming meltdown.
Yet the price has remained flat over the last six months.
Gold currently trades at $7,578 an ounce, almost 10 percent less than a year ago. Some could see this drop as an attractive entry point.
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Jason Hollands, managing director of advisory group Tilney, said investors flee to gold whenever confidence in the financial system collapses.
“It can therefore make sense to own a little gold in a portfolio. A simple method is to buy an exchange traded fund such as Invesco Physical Gold ETC, rather than actual coins or bars,” he said.
Hollands suggests holding gold as an “insurance policy” in case of a crash, but said do not invest more than five or 10 percent of your total portfolio in the yellow metal.
He believes that talk of “the biggest crash in history” has been overblown, despite current worries. “Our view is that the bumpy economic recovery will continue and inflation will peak towards the end of the year.
“Global trade is rebounding, while high levels of employment and cash savings during lockdown should provide a buffer against higher prices,” he said.
Owning some gold is good, but don’t overdo it as performance does not always shine.