Investors go for gold despite faith in FTSE 100 index

Investment firm the Pure Gold Company has experienced a 278 per cent increase in people purchasing physical gold coins and bars over November, compared with the monthly average in 2021.

The surge in demand is being spurred by fears that European lockdowns will spread to the UK, coupled with rising inflation risk - and seems to be driven largely by finance professionals.

Josh Saul, chief executive of the Pure Gold Company, said: “Over two thirds of investors purchasing in the past four weeks work in financial services and have reported concerns about the prospect of European lockdowns spreading to the UK.

"They fear the fall out among global businesses and markets over the coming weeks."

The FTSE 100 may not be ‘sexy’, [but] there are plenty of world-class firms listed.Laidler

Saul commented that, with the hindsight of having lived through previous lockdowns, investors have been making more considered decisions.

Some have decided to sell equities, while others have been selling their house while demand is high and viewings are possible.

He added: "The most notable trend is that many of the current buyers remember how gold and silver fared during the other lockdowns and are buying before it happens rather than in the middle or at the end.

“Brexit shortages and business inefficiencies are also driving demand for gold as our clients see the severe impact of the labour shortages."

According to Saul, the firm has clients who are restaurant owners who will have to shut up shop over the Christmas period because, despite high demand, they cannot secure enough staff.

Saul also said inflation was a growing concern, especially after the Consumer Prices Index rose by 3.8 per cent in the 12 months to October 2021, up from 2.9 per cent in the 12 months to September, according to the Office for National Statistics, with commentators predicting a rise to 4 per cent or higher for CPI (including housing) when the next data is revealed on December 15.

He added: "We are also hearing inflation fears repeatedly cited by gold investors. Inflation is already running at over 4 per cent and is expected to rise even higher. A rate rise in December seems increasingly likely to try and curb inflation, which will impact on borrowing costs.

“Meanwhile, we’ve seen a notable increase in the amount of investors removing exposure to equities within their pensions to purchase physical gold within the same vehicle.

"People are positioning themselves to avoid any potential equity losses, and also benefit from the gains they expect in the gold price."

Despite uncertainty, DIY investors are "positive" about the short-term future of the FTSE100 index.

A survey of 6,000 people across 12 global markets from DIY investment app eToro found 27 per cent of British investors believe the index will grow over 2022.

A third of those British investors surveyed said they were unsure how the FTSE 100 would perform over the next year, while a further 30 per cent said the index would be range bound (+/-5 per cent). 

Of those that think London’s leading index will rise, 23 per cent said it will rally by as much as 15 per cent in the next year, while 4 per cent of those surveyed believe it will surge beyond 15 per cent.

eToro’s Global Markets Strategist, Ben Laidler, said: “While the FTSE 100 may not be ‘sexy’, there are plenty of world-class firms listed in London and the sort of companies that should do well in an economic recovery like we’re in at the moment.  

“Our data suggests that domestic UK investors are waking up to that, and at such attractive valuations, it’s easy to see the appeal."

simoney.kyriakou@ft.com