Investors dump shares and go for gold

17 March 2008 / by Joy Tibbs
While heightened credit crunch fears have led to cautious share dealing, investment in gold has soared recently, with the precious metal raking in more than $1,000 per ounce last week; an all-time high.

Since the US sub-prime crisis broke last year, gold has become a popular alternative to traditional shares, as it is often seen as a more stable and reliable asset. Investment in silver, platinum and palladium has also risen significantly in recent months.

The FTSE 100 was down 84 percentage points at the close of trading yesterday; however interest in gold remained strong. The weak dollar and high oil prices – which have risen to $111 per barrel – have helped to drive up the price of the precious metal.

"Gold is attractive in an economic downturn because you can’t default on it and unlike money, you can’t just print more of it. The finite supply at a time increasing demand also pushes the price up further," Mark Dampier from Hargreaves Lansdown told The Times.

Turmoil in the financial markets was enhanced yesterday when the news of yet another mortgage fund crash became public. The collapse of Netherlands-based fund Carlyle Capital Corporation, which is owned by US firm Carlyle, was not taken lightly by investors.

The $21 billion mortgage fund is certainly not the first to come to a sticky end since last summer; however, the news sent shock waves through the global markets. And, according to experts, this is unlikely to be an isolated event and it may only be a matter of time before further fund failures are announced.

With the bitter taste of the Northern Rock saga still in the mouths of UK investors, many see gold as the real prize in today's investment market.

© Fair Investment Company Ltd