11:50AM GMT 11 Feb 2016
Market panic pushes gold buying to highest level since financial crisis
Funds that invest in gold have been flooded by nervous investors seeking shelter from stock market volatility
By Kyle Caldwell
telegraph.co.uk
The stock market plunge has triggered a gold buying spree with a popular fund that tracks the metal accepting the most cash on a single day since the financial crisis on Tuesday.
Index fund provider ETF Securities told Telegraph Money that February 9 saw the most money flow into Gold Bullion Securities, its gold tracking fund, since January 2009. Investors poured in £239m.
James Butterfill, head of research, said investors had become more cautious and were buying gold to shelter from stock market volatility.
He said the firm’s gold products had attracted £500m of new money so far this year. The surge in demand has pushed the price higher, with spot prices up by 11pc from $1,088 to $1,225 over the past month.
Mr Butterfill also noted that £221m had been invested into the company’s oil tracker funds in that time, with brave investors betting on “black gold” staging a recovery.
The majority of global stock markets have had a nightmare start to 2016, with Britain’s blue-chip share index, the FTSE 100, shedding 12pc. Last month the index entered a bear market after registering a 20pc fall from its peak last April.
Concern over a slowdown in China, the world’s second largest economy, is one factor behind the falls.
This has led some investors to bag profits and seek shelter in the precious metal, the value of which tends not to move in line with other assets, such as shares or property.
“Investors are returning to gold as a core diversifier and safe haven investment. Given the increasingly challenging investment and economic environment, we expect this trend to continue,” Mr Butterfill said.
Unit trusts that invest in bullion and gold mining companies have enjoyed a strong run amid the uncertainty.
The most popular, BlackRock Gold & General, has returned 25pc over the past six months. Long-term investors, however, are still nursing big paper losses, with the fund down by 58pc over five years.
It has been a similar story for the Investec Global Gold and Smith & Williamson Global Gold & Resources funds, as shown in the chart below.
http://www.telegraph.co.uk/finance/personalfinance/investing/gold/12151847/Market-panic-pushes-gold-buying-to-highest-level-since-financial-crisis.html
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