Gold prices up 8% since the credit crunch started while FTSE falls 28%

19 November 2008 / by Rachael Stiles
Gold is worth eight per cent more now than it was at the start of the credit crunch while other stock prices have declined, with the FTSE 100 falling by more than a quarter during the same period.

According to new research from Clerical Medical, those who invested in gold before the credit crunch started have benefitted from a combination of market uncertainty, rising inflation and the weakening US dollar which have all contributed to pushing up its value.

Gold prices reached a record high of $1,012 per ounce in March this year, almost 60 per cent above the five year average of $593, while the FTSE 100 has fallen 28 per cent since the credit crunch started. In 2007, gold saw its biggest annual gain for 28 years, rising 32 per cent – demonstrating significantly stronger growth than other commodities.

After topping an all time high this year, it has since fallen back by 28 per cent to $729 per ounce as the US dollar has strengthened again, but investing in gold has still brought stronger returns than other investments.

In the decade between 1998 and 2008 gold saw growth of 149 per cent, almost double the 82 per cent average commodity growth.

"The average price of gold reached a record high in March as investors sought to safeguard the value of their investments against a backdrop of financial market turmoil, rising inflation and a weakening US dollar." explained Martin Ellis, chief economist at Clerical Medical.

The recent decline in the price of gold must be put into context, Mr Ellis continued, adding that its 149 per cent rise in value over the past decade is nearly five times more than the rise in inflation.

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