Investors are increasingly turning to gold as they seek to protect their assets from volatile stock markets and the threat of inflation.
According new figures from the World Gold Council, investor demand for the precious metal reached 596 tonnes in the first quarter of 2009, up nearly 250% on the same period last year.
Those who got involved late last year have already been richly rewarded, with the gold rising from around $700 an ounce in November to $935 today.
Robust nature of gold
“There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define investment behaviour in the next decade,” says World Gold Council CEO Aram Shishmanian.
"Gold, as one of the few assets that has held its value during the current economic crisis, has been sought out by investors who are drawn to its proven protective attributes as well as safeguarding themselves from the erosive effects of future inflation.
“The shift in the balance of demand that we have witnessed this quarter, where the gold price has risen despite a severe drop in jewellery and industrial demand, perfectly demonstrates the robust nature of gold's fundamental supply and demand dynamics.”
Equities bear/bull debate rages on
In other news, investors are still divided whether the recent revival in the equity markets represents a bear market rally or the start of a long term bull run.
Those on the bearish side point to economic factors like rising unemployment and bankruptcies as proof that a sustained revival is still a long while off. Those on the bullish side will point out that ability of companies to raise capital has returned, and the price of this capital has been coming down
Royal London European Growth Trust fund manager Kevin Lilley believes the upside potential is far greater than the downside risk at this point and that the alternatives – such as cash and government bonds - offer very little.
“I therefore think that the equity bull market is back, and as such I am investing in banks and life companies and early cycle sectors such as mining and metals.”
