To many, gold is seen as an insurance policy against rising inflation. To others, it’s a safe haven against wild financial storms.
Yet increasingly, investors see gold as an opportunity to make a quick buck when worldwide turbulence delivers a jolt to its short-term demand — and pushes up its price.
And its limited supply and an increase in demand from China could see it soar again soon.
Gold’s appeal to so many different types of investor has long helped to buoy its price. During the chaos in Cyprus, gold rose to around $1,600 (£1,060) an ounce — a three-month high.
It has also received a lift from policies of so-called quantitative easing, run here and in the U.S. This is where governments effectively grant their central banks a licence to print money in a bid to kick-start growth.
‘Part of the effect of quantitative easing is to keep interest rates low but this makes investing in the home country’s currency unattractive — so giving added lustre to alternative assets instead such as gold,’ says Alasdair Macleod, head of research at broker GoldMoney.
This has attracted a different type of investor: one keen to turn a profit from global economic swings.
However, the commodity has lost some of its usual shine over the past few months. This is down to a resurgent U.S. and a brighter outlook for investing in shares.
More... Cyprus bailout woes sparks rush on buying gold How to invest in gold: A guide to bullion, coins, funds and ETFs ETF dealing: Buy into gold with a flat £12.50 dealing feeTim Cockerill at wealth manager Rowan Dartington, says: ‘The recovery in the U.S. is most likely going to have a negative effect on gold prices.’
Despite the turbulence, many have faith that gold remains one of the most attractive long-term investments.
Its key lies in its value when performance in other investments, whether those are shares, cash, property or bonds, falls away. On top of this there is a finite supply in the world. Given gold’s presence in so many different elements of life, its price can be affected by all manner of events.
Jason Hollands, of wealth manager Bestinvest, says: ‘Demand is driven by factors such as the economic circumstances of farmers in India, who are collectively big buyers of gold during the wedding season. So a poor harvest in India due to the vagaries of the weather can indirectly impact gold prices.’
However, over the past decade it is impossible to ignore the fact that the price of gold has generally only gone in one direction: up.
In 2003, an ounce was worth less than £339. In September 2011, during huge economic uncertainty, its price reached an all-time high of £1,627 an ounce.
Although it has since stalled — bobbing between £1,271 and £1,525 — its allure continues to dazzle.
Gold bullion is about 17 per cent off its 12-month high at the moment.
Darius McDermott, managing director at discount fund broker Chelsea Financial Services, says ‘A lot of the recent price fall is about confidence in the U.S. economy and the rising dollar.
‘There is also the issue of gold’s limited supply, and specifically the increased demand we are seeing from China — both from individuals and the government — pushing gold’s price higher. There will undoubtedly be strong demand for gold over time, and the cheaper the price gets at the moment, the better the entry point for new investors.’
To invest in gold you have a choice of investment funds, actual gold bullion, or exchange-traded funds (ETFs).
Put your cash into a gold fund and the manager will usually spread your money across a number of gold-mining companies. Gold funds hold the likes of Mexican miner Fresnillo, Australian giant Newcrest Mining and Mali-based Rangold Resources.
However, many funds have had a torrid time recently — dropping by between 15 per cent and 20 per cent — as mining stocks have fallen out of favour, largely due to shareholder returns taking second place to production investment.
For the longer-term investment, Mr Hollands recommends the BlackRock Gold & General fund while Mr McDermott likes Investec Global Gold fund.
The alternative to buying a fund of shares is a low-cost exchange-traded fund. It is the simplest way for investors to get exposure to the price of gold itself.
There are two types of these funds. One uses complicated investment tools called derivatives, which copy the price of gold and, like shares, can be bought via brokers and traded — for as little as £6 a time — during normal market hours.
The other type of ETF, which Tim Cockerill likes, is ETFS Physical Gold, which holds real gold to trade on future prices.
If you want to get your hands on the real thing yourself, it’s possible to buy tangible gold bars, or ingots.
You can use brokers such as GoldMoney or BullionVault. You open an account, put money in and then start trading. The firms then buy and store the metal in a vault for you.
Many investors prefer to buy gold sovereign coins dating from the late 19th century. These ‘bullion coins’ are exempt from capital gains tax.