Is It Still A Good Time To Buy Gold?

With the financial world as we know it crumbling all around us, it is difficult to know where to put your money to preserve its value and secure your wealth and future.

Gold has always been the obvious investment in unstable times, but the price of gold fell 20% at one point in September while the stock markets also tumbled. Does this signal the end of gold’s meteoric rise or does it represent a fantastic buying opportunity?

Here are the reasons why the time is right to buy gold now

  • Despite its volatility in September, gold still ended the 3rd quarter up 11% – far outperforming any other asset class yet again
  • Gold fell due to investors selling their gold holdings to pay for losses in other assets like equities and bonds. It has since recovered some of that lost ground
  • The fundamental issues in the global economy which have pushed gold upwards have intensified with the Euro currency on the verge of collapse and several countries about to default on their debts
  • Inflation is still rising due to increasing commodity prices, meaning cash in the bank loses value. Gold protects against the effects of high inflation
  • There remains a distinct lack of gold supply. There have been no major discoveries in the past 5 years and demand for tax free gold coins far outstrips supply


So what can gold do for you?

Owning gold means you have portfolio insurance against any catastrophes threatening your investments. If there is a terror attack, currency collapse, escalating Government debt, high inflation or record unemployment – gold tends to increase in value as a safe haven asset.

Reduce your tax bills!

You could achieve a 40% discount off the gold price through tax relief whilst also protecting your profits from tax by purchasing gold bullion as part of your Self Invested Personal Pension (SIPP). Investing in certain UK gold coins is VAT exempt and Capital Gains Tax (CGT) free, a great opportunity to diversify AND reduce your Inland Revenue exposure.

How much should be invested and for how long?

Experts agree that to achieve a diversified portfolio, 10-30% of your liquid assets should be held in gold. This should ideally be held for a minimum of 3-5 years plus, but the great thing about gold is that it’s incredibly liquid and easy to sell at any time.


Economic crisis: What on earth is going on?

Economic Crisis headlines

  • Gold has moved down
  • Spanish bonds are yielding 6.8%
  • S&P 500 has lost 3.5% in 2nd week of April
  • Inflation is dangerously high
  • Sterling – 17 month high

Bank deputy governor Paul Tucker warned that inflation is ‘uncomfortably’ high at 3.6% and will remain well above the 2 per cent target for much of this year.  Consequentially the government has decided to cease all current Quantitative Easing in a last ditch attempt to rescue the Pound.

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Whilst the pound rose above $1.60 and €1.22, the issue in many critics’ eyes is, how long can we survive without QE? In the first instance Britain has come under immense pressure to contribute billions more to the Euro Bailout Fund.  Secondly the UK needs to enhance GDP and spend within the economy and the only tool available in spite of low interest rates is to print more money. Critics doubt that the UK will be able to maintain their QE stance much longer…

Interestingly the enhanced value of Sterling has meant that it takes fewer pounds to buy the same ounce of gold thereby making it appear cheaper.  Demand is in fact going up – especially with the S&P 500 dropping in excess of 3.5% and more so with gold prices representing a very strong buying opportunity at present.

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Spain heads the economic crisis

Spain has become front and centre in the European debt crisis with Spanish bonds yielding as much as 6.8%. When that figure reaches 7% – Spain like Greece, Portugal and Ireland will need to be rescued.  With France also being dragged into similar discussions the need for a larger Euro bailout Fund and pressure on the UK to contribute is stark.

Crisis and contagion within the global markets is clearly affecting confidence and the equity indices are suffering.

It’s like a house of cards; which card will be drawn first? QE or Euro Bail Out?

Either way, all likely outcomes point towards the masses flocking to gold just like China, India and Brazil.