| If the so-called 'gold bug', investors who believe | | | | bars. The idea of owning a little 'hoard' may seem |
| passionately in the long-term value of buying gold, are | | | | attractive, but gold in all its forms is expensive to |
| right, then this could be a good time to add a little | | | | ship, store and insure. Instead you may like to |
| glitter to your portfolio. Over the last five years the | | | | consider investing in one of the various gold mutual |
| price of gold has more than doubled from US $250 to | | | | funds. These offer a cost-effective, convenient and |
| US $574 a troy ounce and it is still nowhere near it's | | | | potentially more lucrative way to benefit from any |
| all time 1980 high of US $850 a troy ounce. In fact, | | | | increase in gold's value. |
| there are many who believe it could double in price | | | | A good example of what a mutual gold fund has to |
| AGAIN! | | | | offer is the top-performing Merrill Lynch Gold & |
| Just because gold is cheap now when compared to | | | | General Fund which has produced an average |
| 25 years ago doesn't automatically mean that it is a | | | | annualised gain of 33.9% over the past five years |
| good investment. However, there are three sound | | | | and which is up around 1000% since its launch in |
| reasons to believe that prices will continue to soar. | | | | 1988. The bulk of the UK£855 million fund is |
| Firstly, the growing economies of Asia and the Middle | | | | invested in gold mining shares. Obviously, gold mining |
| East have resulted in a huge surge in demand - | | | | shares rise in line with the value of gold. Your risk is |
| especially for gold jewellery. For proof one need look | | | | diversified and you can leave it up to the fund |
| no further than global gold jewellery sales, which | | | | manager to choose the best opportunities. There are |
| increased by 19% last year. | | | | plenty of funds to choose from and you can pick a |
| Secondly, a rising number of private investors all over | | | | fund that matches your own objectives. One fund |
| the world have been putting some or all of their | | | | might aim to track the price of gold, for instance, |
| savings into gold as a hedge against economic or | | | | another to track one of the various market indices |
| political instability and, in some cases, war. When | | | | such as the FTSE mining index. |
| investors feel the future is uncertain (as many | | | | Speaking of the FTSE mining index, which |
| appear to at the moment) demand for gold always | | | | outperformed the FTSE all-share index in 2005, if you |
| surges. This is doubtless in no small part due to the | | | | have plenty of capital at your disposal an alternative |
| fact that the price of gold tends to move in the | | | | option would be to buy a portfolio of individual mining |
| opposite direction to virtually all other conventional | | | | company shares. On the upside this will give you |
| asset classes - making it ideal when investors wish to | | | | greater control and involvement. On the downside |
| diversify. | | | | you will have to decide which of the hundreds of |
| Thirdly, the mining industry can't keep up with | | | | different mining company shares to buy. |
| demand. Last year's figures show that in excess of | | | | There is one further possibility worth considering. |
| 4,000 tonnes of gold were purchased, but only 2,500 | | | | Invest your money in one of the exchange-traded |
| tonnes were mined. What's more, production is falling | | | | funds (ETFs) for gold. An ETF is listed on the stock |
| by an average of 4% a year and it will take the | | | | market and allows you full exposure to the price of |
| industry anything up to ten years to increase supply | | | | gold, without actually having to take delivery of the |
| by the required volume. In the past, when demand | | | | bullion. The fund buys and holds the gold, while the |
| outstripped supply, the shortfall was met by many of | | | | investor holds ETF shares. The world's biggest ETF is |
| the world's central banks. No longer. Countries, which | | | | Exchange Traded Gold (marketed under different |
| had been disposing of their gold reserves, have | | | | names) which holds 431 tonnes of the yellow metal. |
| slowed down sales or even stopped selling altogether. | | | | This is more than the Bank of England's reserves. |
| Some central banks, notably those of Russia, Iran | | | | One of the most senior industry experts in the |
| and China, are actually believed to be buying bullion. | | | | world, Robert McEwen of U.S. Gold, was recently |
| Although I believe that gold prices are likely to carry | | | | reported as predicting that gold prices may reach |
| on moving upward, I would only suggest buying if | | | | US$2,000 an ounce by 2010. If he is right, you could |
| you already have a range of other investments | | | | be kicking yourself for not getting into the market |
| including shares, bonds and property. Furthermore, I | | | | whilst prices are still relatively low. |
| wouldn't necessarily advise buying gold coins or gold | | | | |