14th May 2013
Despite gold suffering its largest slump for more than three decades, many investors still have faith that bullion will boost portfolio returns writes Philip Scott.
Research from Halifax Share Dealing shows that 42% of retail investors who invest in gold say the recent fall has not changed their investment strategy and they are continuing to either top-up or hold, while a further 24% who invest in the commodity say they believe the fall in value is a buying opportunity. Just 15% expect it to fall further and say it is now time to sell.
In April, gold endured its biggest sell-off for more than 30 years, wiping an eye-watering $1trillion off the value of global reserves. A number of theories in regards to its dramatic fall were put forward, one was that investment banking giant, Goldman Sachs, recommended clients go ‘short’ bullion, essentially bet against further rises for the time being as it cut its long-term forecast for the precious metal. Others believe that gold, following a decade long bull-run, was simply about to go into a period of prolonged weakness.
In its survey, Halifax also found that 28% of investors view gold as a speculative commodity, while 18% see it as an investment portfolio diversifier and 17% use it as an inflation hedge. A third at 34% of respondents have not considered gold as an investment at all.
Of those who do not invest in gold, 40% say the main reason is that it is too hard to estimate a true value, while 38% are put off because it does not produce an income or pay dividends.
Damian Stansfield of Halifax Share Dealing says: “Few investments divide opinion like gold, with many investors viewing it as a volatile, risky or speculative commodity and firm opinions on both sides as to whether this is should be a positive or a negative. All investments involve a degree of risk and gold is no different. There is no guarantee you will get back what you put in and investors should always have a good long think about what level of risk they are comfortable with before they make any investment.”