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Breakfast cereal, detergent and 24 carat gold bars. This may not be the typical shopping list.
But in recent months thousands of customers at the US cash-and-carry giant Costco have been putting one-ounce bullion bars into their trolleys.
They are spending as much as $200m a month, according to Wells Fargo, a bank set up to handle cash flows from the 1849 gold rush.
Hedge funds and central banks in China, Turkey and other nations are also buying, driving up the price of the metal over the past six months by 20 per cent to $2,360.
Gold appears to have assumed its age-old role as a safe haven and a store of value.
So optimistic are the forecasts for further price increases that this latter day gold rush seems like a glittering opportunity.
BHP’s £31billion bid for Anglo-American launched this week also hints at the likelihood of more merger and acquisition fun in the metal mining industry.
Citigroup predicts that bullion will ‘shine bright like a diamond’, rising to $3,000 within six to 18 months.
Goldman Sachs estimates a price of $2,700 by Christmas, although, even at this level, gold would still be below its record high of June 1980 in real terms. As the Soviets invaded Afghanistan, the price hit $850, the equivalent of $3,180 today.
These estimates are based on concern about mounting unrest in the Middle East – and the view that inflation has yet to be quashed, especially given the spiral in US government debt. Evy Hambro, joint manager of the BlackRock World Mining trust and BlackRock Gold and General fund, highlights a shift in investors’ preferences.
He says: ‘People are looking for assets that provide an alternative to cash, and since it’s now easier than ever to purchase gold, the barriers to entry have been lowered.’
Kate Townsend of wealth management business IBOSS also argues that there is a demand for ‘a long-term diversifier against more traditional assets’.
If you are contemplating a diversification in gold, you should be prepared for more of the price volatility seen this week – and be sanguine about the lack of a yield. Gold does not offer an income. Royal Mint has a range of coins and bars at prices starting at £90.52. These are VAT-free and carry an elegant Britannia design.
A stake in a gold fund or trust may be less aesthetically pleasing. But you will not face the issue of insurance or storage.
Gold exchange traded funds (ETFs) hold bullion on your behalf. Broker Interactive Investor recommends the iShares Physical Gold ETF in which I have a small amount of money.
Gold mining stocks could be worth a bet: the surge in the price of this metal means that these companies’ steep production costs should be covered.
Ole Hansen, head of commodity strategy at Saxo Bank, says: ‘Shares in gold mining companies are undervalued, offering potential for investment returns.’
Dan Boardman Weston, of BRI Wealth Management, says: ‘It looks increasingly likely that gold prices will remain elevated and that this will flow through to higher revenues and higher profitability for listed gold miners. I’d favour the VanEck Gold Miners ETF.. It provides exposure to the larger gold miners, such as Newmont, Barrick Gold and Franco-Nevada across a number of different geographical areas.’
Newmont is the world’s largest gold mining group. It made losses in 2023, but this year it is expected to produce 6.9m ounces of gold, compared with 5.5m last year.
The resurgence of gold should be, if nothing else, a prompt to assess your portfolio.
If you have money in the two of the capital protection trusts – Personal Assets and Ruffer – you are already exposed to gold. Their stakes are 12 per cent and 8 per cent respectively.
Ruffer’s performance has been poor, to the chagrin of investors like me.
But I am hopeful that the trust’s focus on bullion may narrow the discount, that is the gap between its shares and its net asset value (NAV), which stands at 7 per cent.
A further boost may come from the trust’s recent investment in silver, which its managers say ‘historically, lags gold, then outperforms’. Another precious metal that you should consider putting on your investment shopping list? It seems so.
