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Alternative investment | 21
Gold Rush
Whether inflation or deflation strikes,
a growing number of people are fast
buying gold for defence...
by Adrian Ash,
Head of Research, BullionVault
t’s common knowledge that gold inflation ahead,” as William Rees-Mogg, a keen mation about how to buy, own and trade the
bullion proved the most reliable historian of gold, recently put it. Indeed, global metal remains scarce.
wealth-store during the vicious demand for gold jumped 26% at the end of Quite how much of your wealth you allocate
inflation of the late 1970s. Yet almost 2008, according to the GFMS consultancy, just to this “ultimate insurance” is something to
un-noticed, gold has once again been as the US, British and Swiss central banks decide for yourself, perhaps working with your
the best-performing asset bar none moved to begin quantitative easing – a.k.a. advisors. But buying and selling gold can now be
this decade, too. printing money. much simpler and safer than during gold’s last
It doesn't matter which currency you earn, Gold prices have now trebled and more multi-year run. It should be dramatically cheaper
spend or invest. Gold has dominated the 21st against the world's major currencies, gaining an as well.
century so far – a fact which will look plain to average 14% per annum in Sterling terms since
future investors, although only a handful appre- the start of 2000. Yet gold still remains a The story so far
ciate it today. Whether gold can now extend or “fringe” asset class for most funds and advisors. The spark for this decade's bull market in gold
repeat this performance, of course, is uncertain. High-margin offers and outright scams are came from the huge central-bank gold sales of
But “People rightly buy gold when they fear starting to trap the unwary, while good infor- the late 1990s. Because whatever Gordon Brown
sells, a few bloody-minded investors agreed, must
be worth buying. It wasn’t just the UK Treasury,
however. Gold sales by those central banks about
to join the Euro reached such levels, they signed
a deal (the so-called Washington Agreement) to
cap annual sales and limit uncertainty on the
open-market price. (Renewed in 2004, the
Central Bank Gold Agreement expires in
September this year. Annual sales undershot the
500-tonne ceiling by one-third or more in both
2007 and 2008. The Agreement may be rolled
over to accommodate the sale of 400 tonnes by
the International Monetary Fund (IMF), first
proposed in February 2008.)
At the same time, in the mid- to late-90s, the
Financial Times and Economist both declared
“the death of gold”, tempting a similar fate to the
famous “death of equities” cover published by April 2009 Investment International
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