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Gold soars as investors seek safety: how to access the precious metal

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Written by: Paloma Kubiak
24/06/2016
The price of gold surged in the early hours of the morning following the leave vote, rising at its fastest rate against the pound in history, according to BullionVault.com.

Gold jumped 22% against the pound overnight, its fastest ever move, leaping to a new three-year high of £1,000 per ounce as nervous investors sought shelter in the ‘safe haven’ asset class.

BullionVault said it traded £26m since midnight in some 6,000 deals and new account openings by 11am today were already double its year’s daily average.

At 10pm last night when the EU referendum polls closed, gold stood at £838 per ounce and at 5am today it stood at £999 per ounce.

GoogleTrends also showed there was a 500% spike in searches to ‘buy gold’ in the early hours.

The price has come down slightly since its early morning peak and currently stands at £965 per ounce.

How can investors access gold?

In investment terms, gold is commonly regarded as an insurance policy, of sorts; a defensive holding that can mitigate against inflation, market volatility, and falls in other asset classes.

Following the UK’s decision to leave the EU, many have turned to the precious metal. Here’s how you can access it:

Physical gold

The most obvious way is to invest in physical gold directly by purchasing bars.

There are a number of established gold bullion and coin dealers in the UK (such as ATS Bullion, Baird & Co, The Pure Gold Company and The Royal Mint), and the World Gold Council publishes a directory of trusted distributors.

However, professional, high security storage and a specialist insurance policy will mean sizeable annual fees, although some sellers offer options for storage on top of sale.

For a lower-cost approach, investors may wish to consider BullionVault, an online service allowing for the sale and purchase of grams of physical gold.

While you buy and own the physical gold (each bar weighs 400 ounces or 12.5kg), the gold doesn’t generally enter your possession – it remains stored in vaults in Switzerland, London, Toronto, Singapore or New York until resale.

BullionVault conducts a daily independent audit of their holdings, and will also allow you to take physical delivery of your gold if you wish.

Exchange traded funds (ETFs)

ETFs are another option. There are a large number on the market – some track the price of physical gold, others track the share price of gold mining companies.

Michelle McGrade, chief executive of TD Direct Investing, recommends ETFs Physical Gold, an ETF that is backed by gold bullion and that provides a return equivalent to the movements in the gold spot price.

Adrian Lowcock, head of investing at Axa Wealth, says investors need to consider whether to buy in sterling or dollar.

The ETFS Metal Securities Ltd Physical Gold is up 12.4% in sterling, while in dollars, it’s up 4%, taking into effect the 8% fall of the pound against the dollar.

Active funds

Investors may alternatively choose to access gold via gold mining stocks. Randgold Resources was up 21% while gold mining company Fresnillo was up 13%  this morning after a dip in the share price earlier in the week when the markets were factoring in a Remain vote.

Experts tend to advise investors to approach gold mining companies with extreme caution and suggest an actively managed fund instead.

McGrade recommends Blackrock Gold & General fund, which invests in companies involved in gold mining, and aims to deliver a return in excess of the FTSE Gold Mines Index. It has proved so popular with TD customers that it has jumped to the third most popular fund on the platform in the last four months.

Lowcock also picks Smith and Williamson Global Gold and Resources fund managed by Ani Markova as it targets mid cap miners. He said: “The manager looks to combine the global macro-economic view with stock picking. The fund can also hold gold bullion directly if the manager sees value there.”

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