Gold, the traditional "safe haven" investment and the currency of pawnbroking, saw its biggest one-day price crash in 30 years last week.
Exchange-traded products (ETPs) have attracted a wave of ordinary investors to gold, as they make it easier to buy into the commodity without physically owning it. And a rash of online companies have sprung up offering cash for gold, spurred on as the yellow metal soared to $1896 per troy ounce in late 2011. But as it slid below $1400, gold felt more like the most volatile of stock-market investments than insurance against world crisis.
Patrick Connolly at adviser AWD Chase de Vere said: "The price of gold has suffered from high levels of volatility, resulting in investors potentially making or losing huge amounts of money over some very short periods."
And Jason Hollands at Bestinvest, another adviser, said: "The influence of speculators and financial traders on the gold price has increased because the growth of exchange-traded products. The growth of the ETP market means it is now very easy to actively trade gold price – you don't need to physically buy and store the stuff and you don't need to invest through the proxy of shares in mining companies."
But is the gold rush over? Adrian Ash at online seller BullionVault said UK investors have seen gold prices go up every year except one since 1998. He said: "Gold has been on the rise for so long, and so strongly, that a big setback has become overdue. Beware panic selling. See how much money you've got at risk, and remind yourself why you got into precious metals."
Adrian Lowcock at advisers Hargreaves Lansdown said those who have invested in gold should remain so, as "longer term, the outlook for gold remains intact".
Hargreaves Lansdown offers physical gold, through ETFS Metal Securities on its Vantage platform, or the BlackRock Gold and General fund which invests in gold companies. Manager Evy Hambro believes an increase in dividends across the gold-mining industry could increase the attractiveness of gold-mining shares relative to bullion, and that the big correction is "a good entry point for long-term investors".
But Hollands cautioned: "The conundrum for investors is that it is difficult to know whether gold now represents good value, since it is difficult to measure fundamental value in the way one might a share or bond."
He added: "It is unclear whether the current retrenchment will be a short-lived buying opportunity or the first leg of a longer bear market. What it undoubtedly is, however, is a wake-up call to those who thought gold was the ultimate 'safe haven'."
Shaun Port, chief investment officer at investment portal Nutmeg.com, said gold "no longer trades as a useful insurance policy against a major economic or market shock". He believes gold holders are likely to continue switching into equities, and said: "It is likely gold will be headed much lower as people unwind very bullish positions and retail investors bail out of ETFs."
Colin McLaughlin, commercial director of pawnbroker Ramsdens which has 43 shops in Scotland, said: "Gold is still twice the price it traded at in 2009 - it will fluctuate over a period of time but the price today is still fantastic."
Be aware that companies buying gold online usually offer only the scrap value for the metal – perhaps one-third of the market price. An investigation by Which? in 2010 found some firms were not even paying that, sparking an inquiry by the Office of Fair Trading.
McLaughlin said: "The key message is if you want to sell, shop around and make sure you get the best price."
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