02 Dec 2010 | Stuart Conlan

All that glitters... is not gold 

During times of economic uncertainty, people often turn to gold – they call it a “flight to quality”.  Gold has been described as a safe-haven when the stock markets are volatile or when there seems to be little in the way of a decent return from the more traditional forms of investment.

The price of gold in the UK has been hitting record highs in recent weeks and we have seen the increased prominence of ‘gold traders’ in shopping malls and on the high street, all of whom are ready to buy that lone gold ear ring or your old gold medallion for a ready price.

The Royal Mint has been reaping the benefits of this demand too and sales of gold coins have soared by 400% so far this year when compared with 2009, the BBC reports.

You can understand the attraction of all things tangible.  Gold and silver coins have been around for hundreds of years as a unit of currency, but these days you can buy a £5 coin to celebrate Prince William’s recent engagement or spend £70 on a collection of coins to mark the 50th anniversary of Coronation Street.

For the more serious investor, and if you have a bit more to spend, then you might be interested in the 2011 Gold Proof Sovereign 5 coin collection, in 22 carat gold, which would cost you over £2,600.

Despite what some might call the ‘novelty factor’, we shouldn’t however forget the advantages of long term and regular stock market investment.  Pound-cost averaging means that it’s possible to smooth out some of the highs and lows of the stock market by investing money on a monthly basis rather than as a lump sum in one go.

Drip feeding money into an investment trust share plan means that you are, indirectly, a part owner of the underlying companies.  Furthermore, you are most likely not buying an asset when it’s trading at a record high price or when the world demand for that asset is constantly pushing the price higher.

In our quest for ‘quality’ then, don’t forget well priced investment plans that offer choice and diversification - plans that allow you to invest on a regular basis in order that you avoid price highs and lows.  They may not come in a commemorative box, but they are certainly worth reflecting on.

Please remember that, as with all stock market investments, the value of your investment can go down as well as up and you may not get back the amount originally invested. You also should note that tax rates and reliefs may change at any time and their value depends on your circumstances.

The views that are expressed in this BG Log should not be taken as fact and no reliance should be placed upon these when making investment decisions. They should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

This BG Log contains information and opinion on investments that does not constitute independent investment research and is, therefore, not subject to the protections afforded to independent research.