Gold swings

Financial Times

If your neighbour starts hoarding Chinese pandas, American buffaloes and Canadian maples in the cellar, do not be alarmed. Demand for gold coins and bullion bars has soared. The yellow metal’s allure as a safe haven in troubled times has sparked a rush into physical gold not seen since the 1979 oil crisis. Investors are right to hedge their bets in the current financial turmoil. But gold’s appeal could prove illusory. ..

First-time gold buyers should pause before they fill up their rucksacks. Those that turn their savings into bullion may be taking on more risk than they think. Like oil and commodities markets, gold has been volatile this year. ...

As long as the world’s stock markets and major currencies continue to gyrate, gold will remain volatile. Sharp price swings do not mark it out as a reliable store of value: far from it. All they show is that investors are nervous. Buying gold should be only one of several hedging strategies. Keep plenty of cellar space for wine.