Gold sees record $2.3billion quarterly investment amid stock market turmoil

24 October 2008 / by Rachael Stiles
There has been a record inflow of gold being bought lately via exchange traded funds as investors rush to this traditional safe haven amongst stock market turmoil.

Exchange traded funds (ETFs) – an investment traded on stock exchanges – are benefitting the most from this influx of interest in investing in gold, according to figures from the World Gold Council, experiencing a quarterly inflow of 145 tonnes, worth $2.8billion – their strongest sales since they were launched.

In addition to ETFs, bullion traders from around the world have also reported an unprecedented surge in demand for investment in small bars and gold coins. The US Mint reportedly suspended sales temporarily of one ounce coins after stocks became depleted.

There has also been a dramatic rise in demand for gold reported by UK, German, and Austrian dealers for the third quarter.

Gold prices are not immune to changes in the stock market, they fluctuated while the US government was in the process of bailing out its mortgage giants Fannie Mae and Freddie Mac, but it rebounded by the end of the quarter as demand continued to rise.

People wanting to invest in gold are finding it increasingly easy as more methods of buying it become available, from investing in gold coins to complex structured financial products.

Investors can now opt for exchange-traded funds, unit and investment trusts, where they invest in gold mining companies, or coins and small bars which are seen as a good way of investing in small amounts of gold.

There are also now gold accounts which allow investors to buy gold on an either allocated basis, whereby they own physical gold which is kept in a vault on their behalf, or on an unallocated basis, when they do not have specific gold allotted to them, so there are no insurance or storage charges but the bank has the right to lease the gold out.

Buying gold online has also become popular as a growing number of investors turn to gold as a way of protecting themselves from the current uncertainty in the financial markets. According to the World Gold Council, gold is a unique investment, because it "is both a commodity and a monetary asset", and it tends to move independently from other markets, unaffected by the same external factors.

Rozanna Wozniak, investment research manager of the World Gold Council, said that she is not surprised by the way gold has reacted in the current economic climate.

"With the cataclysmic downfall of a financial institution that was seemingly indestructible, investors around the world are on tenterhooks for the next piece of bad news." she said.

"Gold is seen as a hedge against inflation; while its real value can vary in the short term, its purchasing power has remained stable over centuries."

In light of the tremours being felt by other markets, gold "is looking like a good place to be right now." Ms Wozniac added.

© Fair Investment Company Ltd