Precious metals increase in worth


With the UK general election looming, fears of a hung parliament are prevalent, and with it comes uncertainty with regards to investment. Investors have legitimate worries as a hung Parliament could potentially lead to rises in inflation, further diminishing sterling, and decreased bank returns.

With all this in mind the smart money is going on gold, and some of its brothers and sisters such as platinum and palladium.

Even though gold bullion needs to be stored somewhere and does not supply the investor with an income it is still a very valuable investment, has seen a good share return in the last ten years, and also has a track record of performing particularly well during election times. In 2005, when the last election was held, gold bullion saw a rise in price of 62 percent.

The value of gold in sterling has seen a rise of 320 percent within the last decade and gold is now facing huge demand. Over the last few years gold has been continuing to gather weight as an ideal investment choice, indeed you may have noticed the recent glut of “trade in your gold for cash” stores that seem to have popped up over night on high streets and in daytime television adverts.

However, amidst the stampede you must be careful not to get ahead of yourself and become too frantic in the search for gold, there are of course ways in which you could stumble and actually lose money instead of making it. Beware of getting caught up in gold coin auctions on websites such as Ebay. On these auctions prices can sometimes outstrip the real value of the gold, often auctioned off in the shape of gold coins. Also it pays to research the sellers rating and also the shipping costs to ensure you are getting what you want and not at an inflated shipping rate. Another potential pitfall is the area of rare gold coins. Unscrupulous dealers may attempt to pass off coins that are far from rare, at a hugely exaggerated price of course. Earlier in the decade a British company was discovered, and subsequently shut down, to be selling ‘rare’ gold coins at an astonishing 700 percent mark up. High mark-ups can also be found in the realm of collectible coins. A set of gold coins from the Royal Mint produced to commemorate to forthcoming 2012 Olympics may seem like a wise choice but at a price of £1,295 you are paying almost twice than the actual amount of gold is worth.

Platinum is also garnering a fair amount of interest from investors, Suki Cooper from Barclays Capital told the Telegraph that “A rebound in auto sales and the subsequent restocking across the auto and industrial sectors, where heavy destocking last year resulted in depleted inventory levels, bode well for the platinum group metals”. An upturn in demand for motor vehicles has also had a good effect on platinum as it is used to make catalytic converters, fund manager Amit Lodha said: ““I prefer platinum to gold as it gives you the best of both worlds: it shows a close correlation to gold, but is also used in auto catalytic converters. Consequently, platinum will do well when gold does well, but also if the economic recovery drives increased car demand”

Another precious metal to keep an eye on is palladium, which has recently seen a 10 percent rise in price. Palladium is also used in car manufacturing, which plays a part in its ‘metal to watch’ status. Daniel Sacks, another fund manager, said: “Palladium has large potential upside from this fundamental perspective, as well as from an investment point of view. Palladium exchange-traded funds are attracting much investor interest as the metal looks very cheap, particularly relative to platinum”.