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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (70487)	5/27/2001 11:33:37 AM
From: Stephen O	Respond to of 116927

From London Sunday Times May 27 2001 MONEY After years in the doldrums gold prices have risen. Is now the time to buy? Report by Sarah Toyne Investors go for gold to beat shares GOLD prices rose by 11% last month largely thanks to interest from institutional investors, who are keen to find an antidote to unhealthy equity markets. The rally in gold is welcome news. Since reaching a peak of more than $800 an ounce in 1981, gold prices have been in the doldrums. But gold prices are highly volatile. After the recent rally, gold fell from $287.50 to $276.50. The fall was sparked by an announcement last week by Vladimir Putin, the Russian president, of his intention to sell gold reserves to help Siberian flood victims. Graham Birch of Merrill Lynch, an investment bank, is upbeat about long-term prospects for gold prices. Birch says: "The factors that have held back the market for so long are now less severe. For example, mining production is starting to fall and there is less exploration, which will increase demand and prices." Current economic conditions could also lead to a renewed interest in gold. Recent interest-rate cuts in Britain and America have not dampened consumer spending dramatically, which could lead to higher inflation. While the value of cash is eroded by high inflation, gold bullion tends to rise in value. It is therefore seen as a hedge against inflation and a safe haven for investors. The extent of demand for gold was illustrated two weeks ago when the Treasury off-loaded 20 tonnes of government reserves onto the market. Instead of driving down the cost, prices rallied. On Thursday of that week the price was $271, compared with $284.50 the following Monday - a rise of about 5%. James Dalby of Bates Investment Services, an independent financial adviser, warns investors to be cautious: "You should only invest in gold as part of a balanced portfolio." There are various options for investors. You can buy bullion, coins or shares in mining firms. Small 24-carat gold bars weighing between 5 grams and 100 grams are sold through Gold Investments, a London dealer. Last week, a 5g bar would have cost about £34. Investing in coins is another option and krugerrands are the most popular. They contain one ounce of gold and cost about £206. Vat has not been charged on gold since January last year. The Royal Mint (01443 623456) sells other gold coins including sovereigns and Britannias. Spink & Son (020 7563 4055 or www.spink-online.com), Gold Investments (020 7283 7752) and www.taxfreegold.co.uk sell krugerrands. If you are buying gold you must consider security. You can buy "unallocated" gold, which is held in trust by a bank. Otherwise, you will have to make your own arrangements. Barclays, for example, charges £10 a quarter to rent a safety deposit box. Alternatively, you can invest in mining or exploration companies directly or through a unit trust, such as Merrill Lynch's Gold & General fund. Over the past six months, it has grown by 34.4% and is a top performer in its sector. But over a five-year period the fund is down by 37.8%. A £1,000 investment would now be worth only £622. But if you want to invest in mining shares - you may have missed out. Some experts are now concerned that the good run is coming to an end. Barclays Stockbrokers, however, recommends Rio Tinto, a mining company, whose shares are up 54% since last October. It not only mines gold but other metals such as coal, copper and aluminium, as well as iron ore. It closed at £14.04 on Friday. Alex Scott of Barclays Stockbrokers says: "We tend to steer clear of companies that only mine gold and go for broad-based mining companies because they are less risky." For a copy of the World Gold Council's guide Investing in Gold, call 020 7930 5171 or go to www.gold.org sunday-times.co.uk