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Britain goes for gold to beat the crunch
Sri Carmichael13 Nov 2008
GOLD has become a financial haven for tens of thousands of people who have lost trust in traditional saving accounts.
New figures show investors are pouring their money into stocks of the precious metal amid concerns about the safety of banks and volatility in global markets.
Confidence in banks appears to have plunged with the collapse of Iceland's Icesave and a series of taxpayer-funded rescue schemes in Britain, continental Europe and America.
Now, accounts from a London online gold brokerage reveal it has grown 475 per cent in the past year, with annual turnover hitting £236 million.
BullionVault, based in Hammersmith, allows customers to invest as little as £20 in the commodity, and now has 40,000 British customers and another 30,000 worldwide. Director Paul Tustain, who set up the firm in 2005, said: "People are choosing to store their wealth in gold rather than money because they doubt the ability of the Government to hold onto the value of sterling.
"We get people investing from all walks of life, people who wouldn't normally take the time to trade in any product. They buy gold to hold their wealth because they feel it's less risky at the moment."
Some customers trade regularly for quick profit, while others let their wealth sit and take advantage of gold's longer-term upward trend in value. Money can be taken out in less than 24 hours.
Vadim Weinig, a 25-year-old jewellery retailer from West Hampstead, said he turned to gold because it felt safer than saving in cash, shares or other financial instruments. "I'm saving up so I can realise my dream to move to Brazil and I've made at least 15 per cent profit over the past year so it's going well," he said. "I look at what's happening to the stock market and people's savings in banks and I'm glad I'm in gold.
"It's less risky, definitely. People trade the stock market thinking they know what they're doing, and really they don't most of the time or they pay brokers large commissions.
"I pay less than one per cent to buy or sell gold. I simply save or trade a little if the market is volatile in the short term. It's incredibly easy and very accessible to the ordinary person."
The value of gold has trebled over the past nine years since hitting an all-time low in the summer of 1999. Since April 2005, the value of an ounce has jumped from £225.53 to £477.95, or 112 per cent.
It means that investors who bought £5,000 worth at BullionVault on 1 April 2005 have seen their stake rise to £10,421. Over the same period, the FTSE100 share index has fallen 12.2 per cent.
Mr Tustain, 46, said: "The common thing that unites our customers is they're all sceptical about using normal methods like banks and shares given the current financial turmoil.
There's clearly a relationship between gold and financial distress. People want to spread their investments.
"We make it possible for ordinary people to get a fair deal on gold - the best prices that are normally only available to professional dealers. Maybe I'll need to focus on something else once the economy recovers, but that could take a decade."
