Gold tends to do well in hard economic times. Photo / Greg Bowker
A gold rush is on as investors try to hedge their funds against the economic gloom.
Auckland Bullion Traders managing director Tony Coleman says the increased interest in gold and, to a lesser extent, silver has been "exponential" as the crisis in world financial markets deepens.
"We've been
very busy ... The interest for us is probably 10 to 20 times that we've been previously doing," he said.
The rush to buy gold ingots and coins became noticeable about two months ago after the first big financial crisis in the US, Mr Coleman said.
Now people were hedging their funds in the "safe" commodity, with some investing hundreds of thousands of dollars. "People want their money in a commodity which is safe," he said.
"If everything turns to custard the gold will still have considerable value. In fact, gold will go up, exponentially."
Mr Coleman said that since May the price of gold had dropped markedly to US$720 ($1248) an ounce but this was offset by a plunging New Zealand dollar, which had fallen to about 59c.
Mr Coleman said silver was a smaller market compared to gold and tended to fluctuate "very strongly".
But because it was relatively inexpensive he said many were prepared to invest in it.
"It's quite possible to double your money in it, even triple it for not a lot of work ... but it is more of a speculator's market."
Financial author Martin Hawes agreed that gold had traditionally acted as a "crisis hedge" in uncertain times. But despite having gold himself, Mr Hawes urged caution and said the value of gold was volatile and there was not a perfect correlation between prices and the metal.
He said buying gold was speculative and not an investment.
"My definition of an investment is that it carries a cash return so for shares, there are dividends, for properties there are rents and for deposits and bonds there is interest," said Mr Hawes.
"Gold doesn't carry a return other than a change in value."
