Why experts think we could be set for another December GOLD RUSH

When markets are volatile, many investors have one thing in mind — finding a safe haven for their money.

But hunting one down is often easier said than done. Perhaps, then, investors should look to a traditional choice — gold.

The precious metal has had a bounce in December for seven of the past ten years.

It has held most of its value whenever the global economy has gone into a tailspin. Hence its reputation as a safe haven.

So is now the right time to buy into a new gold price rally with so much economic turmoil to contend with?

An ounce of gold is currently worth £1,454. That’s an 8 per cent gain since January — although prices have dropped recently.

Given world stock markets have dropped 16.7 per cent in the same period, that isn’t to be sniffed at.

Hector McNeil, co-founder of investment fund shop HANetf calls the returns ‘decent’ when compared with other asset classes. But he says there are reasons to tread carefully.

For a start, the gold price typically falls when the value of the dollar increases. And that has been happening this year (indeed, when priced in U.S. dollars, the gold price has actually fallen this year — by around 3 per cent.)

For UK buyers, the inverse is true. As the value of the pound has weakened against the dollar, the price of gold (in sterling terms) has improved for UK investors. Metals marketplace BullionVault says the rise has triggered the highest buying volumes in Britain since 2016.

The dominance of the dollar — and weakness of the pound and others — has certainly been a strong trend in the money markets this year. But could that be about to change?

Mr McNeil says that if, as expected, the Federal Reserve slows down its spate of interest rate hikes, the dollar may weaken. And, he says, that could lay the ground for another strong festive season for gold.

So if you’re feeling confident about the gold price, how do you add it to your portfolio? It’s possible to buy bullion directly — perhaps in the form of sovereigns or bars. But modern technology means there are easier ways.

Many investors now choose to invest in ETFs (exchange-traded funds) and ETCs (exchange-traded commodities).

ETCs are stock market funds that are designed to track the moving price of an asset like gold or silver. 

ETFs invest in shares in companies that trade in the gold industry. Crucially, though, they can be traded on stock exchanges. That means investors can sell their holdings more easily and with more transparency over the price they are getting.

Private investors can typically invest in these funds via a stocks and shares Isa with brokers such as Hargreaves Lansdown, AJ Bell or Interactive Investor.

Mr McNeil suggests the Royal Mint’s Royal Mint Responsibly Sourced Physical Gold ETC is worth considering. It focuses on recycled gold, reducing its environmental impact, and has gained 8.4 per cent over the last 12 months.

Other options include iShares Physical ETC, which is up 8.6 per cent over the last year, and the Abrdn Physical Gold Shares ETF, which has lost 3 per cent. Despite a dip in 2022, the Abrdn fund has gained 19.49 per cent over the last three years.

Meanwhile, investors who prefer a more varied option can look to ETFs that invest in several precious metals at once. 

For example, Abrdn’s Physical Precious Metals Basket Shares ETF tracks a basket of gold, silver, palladium and platinum. This fund is down 2.5 per cent over one year but has still returned 17.11 per cent over the last three years.

Another option is to invest in gold miners, whose share prices often surge with the gold price.They also pay dividends.

The BlackRock World Mining Trust continues to rank among the most popular funds among retail investors. With stakes in BHP and Glencore, the Trust is now up 78.54 per cent over five years.

Mr McNeil recommends the AuAg ESG Gold Mining UCITS ETF, which has returned 1.3 per cent since last December by backing 25 miners across the world.

All the experts say you shouldn’t place too much of your nest egg on any one asset. You can lose money with gold just like any other investment, so you must spread your risk.

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