Buyers in safe-haven gold rush

BRITONS are returning to the age-old safe-havens of gold bars and coins as they search for ways to protect their wealth against international turmoil and financial instability.

Bullion dealers are reporting a roaring trade in the precious metal, saying some buyers are even admitting to hoarding their treasure under the mattress and in the garden as a safety net against a shake-out in share and property prices.

Others are simply trying to cash in on the booming gold price, which has climbed from $275 (£188) an ounce to $322 in the past five months. More bullish followers say it could hit $400 depending on developments in the Middle East and between India and Pakistan.

The boom is also being fuelled by demand for special-edition Jubilee coins, which contain just under one-quarter of an ounce of gold and are retailing for £140 each. The equivalent amount of gold on the spot market is worth £55. Sandra Ferguson, of dealer ATS Bullion, said trade in South African krugerrands, coins which contain up to an ounce of gold, had almost doubled since the gold price began to run.

'We have certainly noticed an increase in private buying as well as institutional demand,' she said. 'Gold has not performed well for such a long time and now people are thinking it is a good time to start investing again,' she said

Ferguson said low interest rates, the weak share market and gold's VAT-free status were also helping to make the metal an attractive investment. Sales of one-ounce gold bars, which retail for £253, have jumped 50% in the past month, with some private investors spending up to £10,000 a time.

'Some people have said they have put their bars under the mattress at home or buried them in the garden. There is quite a lot of it going on but we don't ask too many questions.'

The glittering gold price is also benefiting the City's handful of managed gold funds, which, through their investment in gold mining shares around the world, offer much more leverage to price fluctuations. Graham Birch, manager of the Merrill Lynch Gold and General Resource fund, said there had been a 'marked increase' in cash inflows on the back of the recovery.

Those who invested at the start of the year have more than doubled their money thanks to the bull run in gold equities, particularly in North America and Australia. Birch said many professional investors were also increasing their gold exposure as a form of diversification.