Gold fever: Britons are swopping their savings for an investment as old as time itself
By David JonesLast updated at 11:50 PM on 09th October 2008
To avoid the attention of would-be muggers, the punters arrived with an array of unostentatious bags.
The women seemed to prefer their old shopping baskets, while one elderly man - dressed as though he'd dashed here straight from the golf course - brought a Sainsbury's carrier.
Then there was the balding, middle-aged chap who kept glancing around furtively as he waited to make his purchase, and would only say that he 'worked in the emergency services'.
The new gold rush is creating some most unlikely speculators
He had just bought a grey rambler's rucksack and hoped it would weigh considerably heavier by the time he boarded the train back to his home in the Kent suburbs.
They were all such ordinary people but they had come flocking to central London with an extraordinary aim born of these desperate times.
All were determined to make sure that their hard-earned nest eggs didn't get swallowed up in the credit crunch crisis - by cashing in shaky savings accounts and parlous pension funds and turning them into that most reassuringly durable commodity: solid gold.
Their Klondike-style mission had brought them to ATS Bullion, one of London's most prominent gold merchants, whose deliberately anonymouslooking office nestles beside the Savoy Hotel, just off The Strand.
They were clamouring for sovereigns and crowns, or mobile phone-shaped bars - anything made from the alluring yellow stuff. But with the run on gold approaching stampede proportions, some disappointed customers left with empty bags.
In the real world of plunging share prices and broken banks, the major gold suppliers are unable to keep pace with demand. 'I have never seen a market like this in my 33-year career,' says Jeremy Charles, chairman of the London Bullion Market Association. 'The gold refineries cannot produce enough bars.'
For many London dealers such as ATS, it means that, for the first time in many years, supplies of some standard bullion products have simply run out.
The emergency services worker from Kent was clearly crestfallen after failing to fill his new rucksack.
'I'm due to retire next month and I don't want my savings to disappear, so I did some research on the internet and decided to invest in gold,' said the 55-year-old man, who declined to be named.
Good as gold: British artist Marc Quinn's recent Siren, a £1.5 million solid gold sculpture of supermodel Kate Moss
'I've just paid out £32,780 on my debit card for two kilo-bars, and I had hoped to take them with me and keep them in my safe. But as they've sold out they'll just have to deliver it to me when they get some more.
'They will store it for you for £100 a year, but with things as bad as they are, I want to be able to see it and touch it.'
It is a sentiment that the overworked staff at ATS have heard often in recent days.
Managing director Sandra Conway says trade has trebled since the crunch began to bite, and many new customers are Mr and Mrs Averages who ordinarily would never have dreamed of dabbling in the rarefied gold market.
'I have seen booms before, in the early Eighties and again when people were scared that their savings might disappear down a black hole caused by the Millennium Bug,' said Ms Conway, who has been in the gold trade for 26 years. 'But this time it's different.
'For one thing, the volume of trade is much bigger. And in the past, the investors were mainly big institutions, whereas now we are getting lots of ordinary people.
'They want to invest in something-tangible that they can take away, and sell easily if the need arises.
'They can buy gold over the phone, but many people seem to have become suspicious of parting with their money to anybody, and want to see in person the gold they are buying. Normally, we have two or three customers at a time but in the past few days we've had queues outside and reached the point where we've had to ask clients to wait downstairs
'Some are worried that their savings might not be secure, even if they keep them under the mattress. One man told me he could see the time coming when paper money will be worthless and he will only be able to buy a loaf with a sovereign.'
The new gold rush is creating some most unlikely gold speculators, Ms Conway smiles.
Grannies have marched in waving dog-eared old chequebooks; others have arrived with cash withdrawn from wobbling banks. Some have even sold their houses and put all the proceeds into gold.
'One retired gentleman said he owned two properties, one of which he rented out. He was worried that the housing market would crash, so he'd moved into the smaller house and sold the bigger one for a £250,000 profit, which he used to buy gold.'
But at a time of such uncertainty on the financial markets, why is everyone so certain that gold is a sure-fire bet?
First, though its value can be affected by fluctuations in the global markets, it does not depend on them. Its price is fixed against the U.S. dollar twice daily, by a coterie of leading London banks which take many other factors into account - not least, of course, rising and falling demand.
Given this latest rush, therefore, one might have expected the price to have reached an all-time high.
Ironically, however, the strengthening of the dollar against the pound has pushed prices down in recent weeks, and it fell a little further to around $888.50 (£516) an ounce - after the U.S. Senate passed George Bush's £400 billion bailout plan.
But according to the received wisdom, Britain's new middleclass Midases needn't fret. Experts agree that it is sure to recover soon. Some even predict that the price could treble to $3,000 (£1,750) an ounce before the decade ends.
One doesn't need to know much about the metal markets to understand why. Gold has been extracted from the ground since prehistoric times, yet it remains so rare that the total amount that has ever been mined - about 150,000 tonnes - would comfortably fit into a cube-shaped tennis court.
It is estimated that a further 50,000 tonnes remain below ground - principally in South Africa and China (now the world's major producer).
With extraction becoming increasingly expensive, and some 75 per cent of aboveground stocks locked away in the vaults of private investors, however, it is unlikely that there will ever be a gold glut.
All of which makes Gordon Brown's decision to off-load more than half of the UK's gold reserve in 1999, at a time when the markets were stagnating and the price was at a 20-year low, seem extraordinarily short-sighted. One leading analyst estimates that Brown's great gold sell-off cost taxpayers £1.2 billion.
Armed with homespun knowledge gleaned from the internet and library books, the modest punters thronging to ATS aren't intending to make the same mistake.
Clive Smith, 35, an unmarried, London-based IT contractor earning roughly £60,000 a year, has been investing as much as £100 a month in gold since 2004, but splashed out £4,500 on bullion in August.
And on Thursday, he was back in The Strand - to snap up a few extra ounces for his mother.
'My mum knows a good thing when she sees one, and she isn't the only one,' he told me. 'My two best friends have just invested between £5,000 and £10,000, and two work colleagues are buying gold, too.
'I wanted to buy gold bars today, but they had none, so I settled for some Royal Mint sets instead. One reason I like gold so much is because I can actually sit there and look at it - unlike a Barclays account or an online shares account.
'The price may go down for a while, but I don't regard that as losing money - just an opportunity to buy more at a good price. And it's something you know will never vanish.'
It is indeed. In any marketplace, however buoyant, though, there is always someone who bucks the trend. Bill Morris, a genial hospital technician from Hertfordshire, is such a man.
Mr Morris was the only customer to be selling gold at ATS when I visited.
He arrived with three 1973-minted Krugerrands, each worth £460, wrapped in tissue paper and stuffed inside an envelope. The coins were a reward from his father for passing his O-levels, but he had decided to part with them because he needed the money to service his classic Italian motorbike.
On seeing that the price had dropped $30 (£18), however, he relented and sold only one of the coins.
'I'm sure I'll get more for them if I just hang on for a while,' he said knowingly, stuffing the heavy envelope back in the obligatory rucksack and heading towards the Tube.
He probably will. For when thousands of families fear their cash savings are no longer safe - even stashed under the mattress - it seems that this very ordinary gold rush has quite some way to run.
By David JonesLast updated at 11:50 PM on 09th October 2008
To avoid the attention of would-be muggers, the punters arrived with an array of unostentatious bags.
The women seemed to prefer their old shopping baskets, while one elderly man - dressed as though he'd dashed here straight from the golf course - brought a Sainsbury's carrier.
Then there was the balding, middle-aged chap who kept glancing around furtively as he waited to make his purchase, and would only say that he 'worked in the emergency services'.
The new gold rush is creating some most unlikely speculators
He had just bought a grey rambler's rucksack and hoped it would weigh considerably heavier by the time he boarded the train back to his home in the Kent suburbs.
They were all such ordinary people but they had come flocking to central London with an extraordinary aim born of these desperate times.
All were determined to make sure that their hard-earned nest eggs didn't get swallowed up in the credit crunch crisis - by cashing in shaky savings accounts and parlous pension funds and turning them into that most reassuringly durable commodity: solid gold.
Their Klondike-style mission had brought them to ATS Bullion, one of London's most prominent gold merchants, whose deliberately anonymouslooking office nestles beside the Savoy Hotel, just off The Strand.
They were clamouring for sovereigns and crowns, or mobile phone-shaped bars - anything made from the alluring yellow stuff. But with the run on gold approaching stampede proportions, some disappointed customers left with empty bags.
In the real world of plunging share prices and broken banks, the major gold suppliers are unable to keep pace with demand. 'I have never seen a market like this in my 33-year career,' says Jeremy Charles, chairman of the London Bullion Market Association. 'The gold refineries cannot produce enough bars.'
For many London dealers such as ATS, it means that, for the first time in many years, supplies of some standard bullion products have simply run out.
The emergency services worker from Kent was clearly crestfallen after failing to fill his new rucksack.
'I'm due to retire next month and I don't want my savings to disappear, so I did some research on the internet and decided to invest in gold,' said the 55-year-old man, who declined to be named.
Good as gold: British artist Marc Quinn's recent Siren, a £1.5 million solid gold sculpture of supermodel Kate Moss
'I've just paid out £32,780 on my debit card for two kilo-bars, and I had hoped to take them with me and keep them in my safe. But as they've sold out they'll just have to deliver it to me when they get some more.
'They will store it for you for £100 a year, but with things as bad as they are, I want to be able to see it and touch it.'
It is a sentiment that the overworked staff at ATS have heard often in recent days.
Managing director Sandra Conway says trade has trebled since the crunch began to bite, and many new customers are Mr and Mrs Averages who ordinarily would never have dreamed of dabbling in the rarefied gold market.
'I have seen booms before, in the early Eighties and again when people were scared that their savings might disappear down a black hole caused by the Millennium Bug,' said Ms Conway, who has been in the gold trade for 26 years. 'But this time it's different.
'For one thing, the volume of trade is much bigger. And in the past, the investors were mainly big institutions, whereas now we are getting lots of ordinary people.
'They want to invest in something-tangible that they can take away, and sell easily if the need arises.
'They can buy gold over the phone, but many people seem to have become suspicious of parting with their money to anybody, and want to see in person the gold they are buying. Normally, we have two or three customers at a time but in the past few days we've had queues outside and reached the point where we've had to ask clients to wait downstairs
'Some are worried that their savings might not be secure, even if they keep them under the mattress. One man told me he could see the time coming when paper money will be worthless and he will only be able to buy a loaf with a sovereign.'
The new gold rush is creating some most unlikely gold speculators, Ms Conway smiles.
Grannies have marched in waving dog-eared old chequebooks; others have arrived with cash withdrawn from wobbling banks. Some have even sold their houses and put all the proceeds into gold.
'One retired gentleman said he owned two properties, one of which he rented out. He was worried that the housing market would crash, so he'd moved into the smaller house and sold the bigger one for a £250,000 profit, which he used to buy gold.'
But at a time of such uncertainty on the financial markets, why is everyone so certain that gold is a sure-fire bet?
First, though its value can be affected by fluctuations in the global markets, it does not depend on them. Its price is fixed against the U.S. dollar twice daily, by a coterie of leading London banks which take many other factors into account - not least, of course, rising and falling demand.
Given this latest rush, therefore, one might have expected the price to have reached an all-time high.
Ironically, however, the strengthening of the dollar against the pound has pushed prices down in recent weeks, and it fell a little further to around $888.50 (£516) an ounce - after the U.S. Senate passed George Bush's £400 billion bailout plan.
But according to the received wisdom, Britain's new middleclass Midases needn't fret. Experts agree that it is sure to recover soon. Some even predict that the price could treble to $3,000 (£1,750) an ounce before the decade ends.
One doesn't need to know much about the metal markets to understand why. Gold has been extracted from the ground since prehistoric times, yet it remains so rare that the total amount that has ever been mined - about 150,000 tonnes - would comfortably fit into a cube-shaped tennis court.
It is estimated that a further 50,000 tonnes remain below ground - principally in South Africa and China (now the world's major producer).
With extraction becoming increasingly expensive, and some 75 per cent of aboveground stocks locked away in the vaults of private investors, however, it is unlikely that there will ever be a gold glut.
All of which makes Gordon Brown's decision to off-load more than half of the UK's gold reserve in 1999, at a time when the markets were stagnating and the price was at a 20-year low, seem extraordinarily short-sighted. One leading analyst estimates that Brown's great gold sell-off cost taxpayers £1.2 billion.
Armed with homespun knowledge gleaned from the internet and library books, the modest punters thronging to ATS aren't intending to make the same mistake.
Clive Smith, 35, an unmarried, London-based IT contractor earning roughly £60,000 a year, has been investing as much as £100 a month in gold since 2004, but splashed out £4,500 on bullion in August.
And on Thursday, he was back in The Strand - to snap up a few extra ounces for his mother.
'My mum knows a good thing when she sees one, and she isn't the only one,' he told me. 'My two best friends have just invested between £5,000 and £10,000, and two work colleagues are buying gold, too.
'I wanted to buy gold bars today, but they had none, so I settled for some Royal Mint sets instead. One reason I like gold so much is because I can actually sit there and look at it - unlike a Barclays account or an online shares account.
'The price may go down for a while, but I don't regard that as losing money - just an opportunity to buy more at a good price. And it's something you know will never vanish.'
It is indeed. In any marketplace, however buoyant, though, there is always someone who bucks the trend. Bill Morris, a genial hospital technician from Hertfordshire, is such a man.
Mr Morris was the only customer to be selling gold at ATS when I visited.
He arrived with three 1973-minted Krugerrands, each worth £460, wrapped in tissue paper and stuffed inside an envelope. The coins were a reward from his father for passing his O-levels, but he had decided to part with them because he needed the money to service his classic Italian motorbike.
On seeing that the price had dropped $30 (£18), however, he relented and sold only one of the coins.
'I'm sure I'll get more for them if I just hang on for a while,' he said knowingly, stuffing the heavy envelope back in the obligatory rucksack and heading towards the Tube.
He probably will. For when thousands of families fear their cash savings are no longer safe - even stashed under the mattress - it seems that this very ordinary gold rush has quite some way to run.
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