2012 Overview

2012 saw some volatile periods for the gold market but overall the price stayed in a bracket between $1,540 and $1,800 per ounce, finishing the year only marginally higher than it started. Gold did not achieve the gains that a number of well-known commentators were expecting, as many had predicted the price to finish the year well over $1,800.

Philip Klapwijk, head of metals analytics at Thomson Reuters GFMS, reported in a recent Financial Times (FT) article that in 2012 there had “definitely been a loss of momentum. Some classes of buyers pretty much filled their boots and may even have been prepared to offload a bit. New buyers didn’t step up to keep the price higher.”

Demand for the metal was low during the first half of the year, leading to a drop in the price – likely to have been caused by investors selling some gold holdings to take advantage of the strong price at the end of 2011, and Asian investors not being able to afford to purchase as much gold due to the high price.

“Chinese jewellery and investment demand was down 1 and 2% respectively last year, while Indian net imports fell by about a third.” Mr Klapwijk said, “Nonetheless, India held on to its position as the world’s largest gold consumer, buying about 40 tonnes more of the metal than China.”

Prices rebounded in the second half of the year, propped up by the US Fed’s open-ended Quantitative Easing (QE) program, further bouts of QE by the Bank of England and Bank of Japan, increased demand from Asian buyers (particularly during the Indian festival season) and high Central Bank buying from emerging economies including Brazil, Iraq, Russia, Ukraine & Mexico.

What does 2013 hold for gold?

This has posed the worry for many investors that the gold “Bull Run” may be coming to an end, with a growing voice in the industry feeling the rally might be over. Thomson Reuters GFMS has acknowledged that some investors have become disillusioned with recent performance, but have predicted a turnaround in fortunes for 2013.
The possibility of credit rating downgrades in the US and UK could spur a new wave of investment into gold as a safe haven asset, which could help to push the price through the $1,800 barrier.

“What we’re seeing is a fairly extended pause and period of consolidation before gold makes another move higher,” said Mr Klapwijk.

Gold’s most recent nominal high of $1,920 per oz. was on the back of Standard & Poor stripping the US of its triple A rating in August 2011. With US politicians now haggling over the fiscal cliff and debt ceiling, rating agencies have been warning of more downgrades. If the US loses its reputation as a safe haven, “There will be people forced to sell US government obligations and seek other homes for their money,” said Mr Klapwijk.

These factors, along with continued loose monetary policy, could help to drive gold to a record high.

But what happens if the market does falter and the run comes to an end?

There will be a point when loose monetary policy has to come to an end, with the US predicted to tighten their monetary spending towards the end of 2014. This could potentially spell an end of the gold bull market. “You’ve got to see a new high this year to validate the gold bull market. If we don’t get that, time could start to run out.”

As with any form of investing, being able to buy at a low price and sell when it is high will result in a good profit for the investor. If gold does reach a new high this year, some investors may choose to cash in their gold at a profit. This should depend upon the circumstances of the investor, the amount of gold they hold in their portfolio and their long term investment aims.

An increase/decrease in the gold price is likely to be due to an increase/decrease in the value of traditional stock market investments in the opposite direction. This means that holding gold would either offset losses elsewhere, or a fall in the gold price would be offset by gains elsewhere.

This is why gold (physical) should be held as part of a well-diversified investment portfolio, with 5-10% of the portfolio in gold. This acts as portfolio insurance as gold is considered to be one of the best safe-haven assets for storing wealth over the medium to long-term.

Purchasing gold should always be viewed as a medium to long-term investment, with a 3-5 year term. This is due to the transaction and storage costs associated with the physical asset. There are cheaper alternatives for investors to gain exposure to gold, such as Exchange Traded Funds (ETF’s), Gold Funds, Gold Mining Company Shares and Spread-betting – but these do not give the investor access to the physical asset.

• Author: Luke Jackson, Intelligent Partnership
• 6th February 2013

With a growing number of interested investors, comes a growing number of investment questions. This is what has occurred with the introduction of shipping container investments, over the last few years. Like a hard-working news reporter, the average investor must appropriately satisfy the 5 Ws, before committing their finances to any investing opportunities. Furthermore, the answers to who, what, when,where and why, must not only satisfy their interest and curiosity, but also ease their apprehensions; as well.

WHAT am I making an investment in? Investors are purchasing their own fleet of shipping containers. These are the large metal boxes, that are seen on cargo vessels, trains and trucks, all over the world. They are used to ship everything from laptop computers, to heavy machinery. Since its widespread implementation, it has lowered transportation costs to all-time lows, while stimulating a boom in world trade. In effect, they are seen as the building blocks of the modern economy, because of the fact that they have introduced efficiency, to the manner in which goods are transported; all across the globe.

WHO will lease my shipping containers? Investor containers are used to meet the rising demand for shipping containers, from international manufacturers and global industry leaders. Since the decline of global financial markets in 2008, more and more shipping lines have come to rely upon leasing companies, for the containers they need to consistently meet their international shipping obligations. Shipping companies understand that leasing a container is often more costly than ownership, however this approach offers them more much more flexibility, reduces their operating costs and has proven to be more efficient; in the long run.

WHEN will my containers begin to generate revenue? With the help of a shipping container management and leasing company, investors will begin to earn profits, as soon as; their shipping container investment is added to the companies active fleet. Container leasing arrangements are very flexible and well structured, to enable the container owners to protect their principle and enjoy a low-risk investment. Currently, the established container leasing arrangements, fall into three major categories:

Master Lease: Also referred to as full-service leases. In this instance, the leasing company assumes full management of the container fleet and for repositioning, following the off hire and the contract termination.

Long-term Lease: Also referred to as dry leases. This approach is commonly associated with the extended use of the leased container, by an ocean carrier.

Short-term Lease: Also called spot market leases, because the lease price is strongly influenced by current market conditions, and is highly influenced by the volatility of supply and demand.

WHERE will my shipping containers be deployed? At the moment, the demand for shipping containers is rising around the globe, especially in emerging economic markets; like Brazil, UAE and even Russia. A well established container management company, will have analyst and logistic specialist, that will predict growth and demand for containers.

WHY are shipping containers in such high demand? Although there are a number of factors influencing the growth of the global economy, and the subsequent rise in demand for shipping containers, there are 2 notable contributors: the strong and steady growth of emerging countries and the expansion of the Panama Canal. As a result of container shortages throughout the world, the leased container fleet steadily increased in both 2010 (8.8%) and 2011 (9%), and is expected to continue to grow at nearly the same rate; through 2015. With that being said, maritime analysts predict that container investing and leasing companies will own approximately 40 per cent of the container market, by that time.

With traditional investing methods continuing to raise concerns with investors, alternatives like shipping container investments are steadily rising in popularity, and quickly replacing many of the traditional strategies; in more and more investor portfolios. With that being said, great investment opportunities still exist and are continuing to prove that they can meet the constant demand of the world’s growing industries, as well as; consistently provide profitable returns for investors.

• Source: Goarticles.com
• Author: Leighton McCalman. I am an investments researcher and analyst at Alistair-Leighton. The opinions that I express about investing, and the best, safe investment opportunities I discover, are based on my most current investment research; and are subject to my own interpretation.

But John Jackson has always ploughed his own furrow, so to speak. Seventeen years ago he did the unthinkable in farming circles when he sold his tillage farm in Donegal to invest the money in forestry. However, this was no flight of fancy driven by a love of trees. Mr Jackson was able to buy five times the amount of land that he originally had by targeting more marginal land at a fraction of the price.

He was also aware of a fact that has inexplicably by-passed the vast majority of Irish investors. Trees grow faster here than almost anywhere else in the northern hemisphere. Our growth rates, referred to as ‘yield class’ in the business, are often three times faster than other countries that have bigger forestry industries, such as Austria, Germany, Finland and Sweden.

“We’ve only got 11pc of our land area in forestry,” says Paul Brosnan, director of the Dublin-based International Forestry Fund. “This is miniscule compared to the likes of Finland where two thirds of the country is forested. However, with our tremendous growth rates, a 10pc increase in our planted area would bring our annual output to the same levels.”

In addition, we have some of the highest prices for timber here in the whole of Europe. “We have a fantastic sawmill sector here that has developed huge export markets,” states William Merrivale, a Cork-based forestry consultant. “However, they are struggling for adequate supplies. 10pc of our annual requirement is currently imported from Scotland, and our mills could easily process double what they are handling at the moment,” he adds. In addition to the demand for mature logs, private foresters such as John Jackson up in Donegal are also witnessing a huge growth in demand for the previously unsaleable ‘thinnings’ that are harvested off a plantation every five years after the first 15 years of growth.

The demand is being driven by rising oil prices, as people look for lower cost alternatives to heat everything from homes to hotels. This by-product adds another €80/ha per year and provides a valuable cash-flow to this long term investment. The overall rate of return over the life of a 35-40 year plantation is somewhere between 4-7pc. In addition, the first €80,000 of annual income is tax free.

So why isn’t the country being blanketed in trees?

Well, the first thing is that many rural communities don’t want their parish subsumed in forest. “It becomes a darker, quieter place,” one local told me on a recent visit to Donegal.

Subsidies

The second reason is that farming, while not offering stellar incomes, has provided just enough to stop farmers from considering the alternatives. A raft of EU subsidies have kept an artificial floor under farm returns on our more marginal land. But there are signs that this may be about to change. The most recent figures on planting applications reveal a 25pc increase. “Farm payments have gradually eroded over the last decade. In contrast, forestry payments have remained relatively solid,” remarks William Merrivale.

This, coupled with the increasing realisation that farming on marginal land in wet years like 2012 hasn’t a hope of getting a viable return from globalised food commodity markets, is making more farmers consider the unthinkable. There are also plenty of enticing incentives to encourage more into the sector. The first is a planting grant that covers the cost of planting and maintenance for the first four years. Then there’s the annual government-funded subsidy of approximately €450/ha (for diverse coniferous plantations) for the first 20 years after planting. Again, it’s all tax-free.

The income from thinnings effectively takes over where the subsidy payment leaves off. Yes, there is a maintenance and insurance cost, but this shouldn’t be more than €25/ha per year, and is often a lot less. The problem for the average punter is that these incentives are largely available to farmers only. As a result, buying ‘bare’ land for €5,000-10,000/ha to plant tends to be the preserve of farmers and large forestry companies. However, forestry investment funds such as those being operated by Mr Brosnan open up the possibility for investors to get a slice of the action.

“The average investor in our 18,500ha of trees has just €4,000 tied up. We usually launch at least one new portfolio every year that will typically last for 12 years. The most recent one returned about 4pc per annum, with the previous two schemes that ended in 2011 returning over 6pc each,” he claims. The big picture looks good too. As with any commodity, global demand is rising and predicted to continue in the same vein for the foreseeable future.

For a low risk, sustainable investment, that doesn’t involve a brick or ounce of mortar, it’s one worth considering.

• Source : Independent.ie

In the shorter term, economic growth has remained constricted, and deflation is just as much a risk as inflation. However, policymakers continue with their quantitative easing programmes in an attempt to boost flagging economies, which can also have the effect of devaluing currencies and stoking inflation. Many commentators believe this could be a real long-term threat.

Although gold doesn’t produce any income it could help preserve the spending power of capital while interest rates remain below the rate of inflation. Gold cannot be debased in the same way as paper currencies (you can’t print more gold) and while traditionally considered a hedge against inflation, it could also provide shelter against deflation.

Demand from central banks also remains robust, particularly in emerging markets where governments are trying to diversify currency reserves away from US dollars. In China gold accounts for less than 5% of reserves, compared with around 75% in the US and over 70% in Germany.

Generating the supply to meet the increased demand could be a challenge. Few central banks are willing to sell their gold to meet the demand of others, while it is becoming more difficult to extract gold from the ground. According to Ani Markova co-manager of the Smith & Williamson Global Gold and Resources Fund, on average it is estimated twice as much rock needs to be mined today to extract the same amount of gold as in the 1990s. Most high-grade reserves are also located in hard-to-reach areas, or less politically stable regions.

How can investors gain exposure?

There are a number of ways investors can gain exposure to gold, and as ever the best route will depend on individual circumstances and attitude to risk. Gold is a specialist area, and so can be more volatile or subject to unique pricing factors, as such we would only suggest a small allocation as part of a balanced portfolio.

Sophisticated investors looking for exposure to physical gold bullion could consider an exchange traded commodity (ETC) which aims to track movements in the gold price. They can either hold physical bullion, stored in vaults, or gain exposure using derivatives. It’s important to remember that once fees and charges are taken into account the ETC will not track the gold price exactly. They are also subject to additional risks, especially those that use derivatives. Particular attention should be paid to the financial security of the company holding investors’ assets, or that of any counterparty with which derivatives contracts are made.

If the gold price rises, companies able to maintain or reduce costs could increase the profit they make on each ounce of gold produced, in turn potentially leading to rising share prices. However, there are no guarantees and investing in the shares of gold mining companies is considered higher risk than investing in physical bullion.

For adventurous investors looking for exposure to gold mining shares the Smith & Williamson Global Gold and Resources Fund features on the Wealth 150 list of our favourite funds in each sector. Managers Ani Markova and Robert Lyon tend to have a bias towards higher risk smaller companies. After performing poorly during 2012 they believe a gap has opened between the valuations of gold mining companies and the price of physical gold. They believe this gap could begin to close during 2013, as interest rates remain low, governments continue to print money, and gold remains attractive in the current environment.

• Source Hargreaves Lansdown
• Richard Troue | 29 January 2013

Volatile costs for fossil fuels and rising concerns over emissions. “A doubling of present CO2 emissions by 2050 if we do nothing.” A share of “for at least 10% of global emissions in 2050, as compared to 3% today, if measures are not taken.”

Sounds a lot like aviation, right? Well, in this case, it is the marine shipping industry. Shipping giant DNV has identified those risk factors in an update of its landmark (2009) Pathways study, noting that “with rising fuel prices and impending environmental regulations, the pressure is on for more efficient and environmentally friendly ships.”

Back in 2009, the task was daunting enough: reducing CO2 emissions by 15 % on the existing
world shipping fleet and by 30 % on of the predicted global fleet in 2030. Now, DNV has taken its analysis out to 2050, and determined that a 60% reduction in emissions is required by that time.

“If shipping should be required to reach emission levels in 2050 consistent with a global 2oC stabilisation target, we need to do more than stabilizing emissions at present level. To achieve the 2oC target, the shipping sector must reduce CO2 emissions by 60 % from today’s emission level”, says Magnus Strandmyr Eide, Senior Researcher at DNV Research & Innovation and main author of DNVs pathways study.

Here’s the upside

From DNV: “History has shown that the maritime sector can be quick to adopt new fuels, should the right incentives be in place; in the age of the steamships, in the short decade between 1914 and 1922, the percentage of vessels using oil rather than coal in their boilers increased from 3% to 24%.”

Here’s the downside

Again, from DNV. ˇAs in the 1920s the main driver for such a shift today is fuel price and energy efficiency.”

In short, though the driver is carbon concern, the mechanism will be price, and there is continuing questions as to the extent to which the cost carbon will be internalized within the fuel. Right now it is almost fully externalized, and shipping companies do not pay directly for the global weather impact of their carbon emissions.

Here’s demand, for better or worse depending on your outlook

Overall demand is growing. According to Purvin & Gertz, bunker fuel demand has been growing at an average rate of 4% since 1995. It’s expected to reach 275 million tons by 2015 and more than 300 million tons by 2020.

Technology options

The options are limited because of the nature of shipping and the need for stored energy. The technologies are, in general, three in number. Liquefied natural gas, which offers a 20 percent reduction in emissions; biofuels, which offer a 50%+ reduction, and nuclear, which offers a 100% reduction.

The 60 percent target makes clear the promise and limitations of, say, liquefied natural gas — it just doesn’t get the industry anywhere near its mid-range, much less long range targets.

“It is realised that other pathways are possible,” the study says, “e.g. by including technologies currently very costly or immature, or through technological breakthroughs which are not identified, but which should be expected. From the existing alternatives, the introduction and use of biofuels stands out as the best option, considering the overall environmental, safety and security impacts.”

Interesting in this study — the dramatic impact of biofuels, based on current technologies, when carbon prices reach $100 per metric ton.

The limitations

Here are the limitations the study indicates on known technologies:

LNG
One challenge for shipping is that LNG tanks typically require 2 to 3 times more space than a fuel
oil tank. Since natural gas must be stored either liquefied or compressed, these storage tanks are also more expensive. Based on recent experience, the new-build cost of LNG-fuelled ships is between 10 and 15 % higher than for equivalent diesel-fuelled ships.

Biofuels
Widespread use of biofuel in shipping will depend on price, other incentives, and availability in sufficient
volumes. Breakthroughs in production methods, enabling use of previously untapped feedstock and avoiding competition with food production, are expected.

Nuclear
The main barriers to nuclear shipping are related to uncontrolled proliferation of nuclear material,
decommissioning and storage of radioactive waste, the significant investment costs, and societal acceptance. Although several hundred nuclear-powered navy vessels exist, few nuclear-powered merchant ships have been built.

The bottom line for biofuels

One aspect we note – residual heavy fuel oils are less costly to produce – requiring less upgrading than, say, aviation biofuels. But given the price and performance requirements of the shipping industry — and the likely competitive response of traditional fuel suppliers — there are two requirements.

1. Expansion of this market will clearly require a carbon element in pricing (or a low-carbon standard), to eliminate the advantage that fuel suppliers have in producing high-emission fuels.
2. Feedstock costs lower than $50 per ton, at current prices, are likely to be required to stay competitive with fossil fuels on price.

• Source: Biofuel Digest
• Author: Jim Lane

SolarFuel’s process uses excess renewable energy generated as a result of Germany’s push to reduce greenhouse-gas emissions. There’s now so much renewable energy in Germany that supply sometimes exceeds demand—such as when the wind is blowing late at night. That power could be cheap enough to make methane from water and carbon dioxide, even though the process for doing so is inefficient.

SolarFuel says its approach may be a solution to one of the biggest challenges with renewable energy—its variability. Methane, which can be stored in existing natural-gas storage facilities, provides a convenient, long-term option for storing the energy.

To make the methane, SolarFuel combines two existing technologies. One is electrolysis, which splits water to produce hydrogen and oxygen. The other is methanation, which combines hydrogen with carbon from carbon dioxide to make methane. The company says its innovation lies in the way it’s combined the two processes.

SolarFuel’s chief customer officer, Stephan Rieke, says that the amount of excess renewable energy in Germany grew, in two years, from 150 gigawatt-hours per year to 1,000 gigawatt-hours per year. “That’s electricity that we could use for nothing,” he says. The amount is expected to continue to grow as Germany pursues ambitious goals to cut greenhouse-gas emissions 80% by 2050 using largely renewable energy.

SolarFuel can’t compete directly with the wholesale price of natural gas. But it hopes to compete with biogas—methane produced from organic sources—a relatively large industry in Germany. It may also compete with retail natural-gas prices by building its plants close to consumers.

The uses of the technology outside of Germany—with its excess supply of cheap renewable energy—will be limited. The company is in talks with mining companies in Chile that currently get power from expensive diesel generation—its system could help such operations cut costs. The technology might also be attractive for rural communities without grid power.

One major drawback of the process is its inefficiency. It’s small-scale demonstration systems are only 40% efficient at converting electricity to methane. It hopes to improve that to 60% efficient in its commercial plants.

Even then, when factoring in the losses from burning methane to generate electricity again, the overall process is at best 30% efficient. SolarFuel hopes to recoup much of that lost energy by using it for steam, but doing that is limited by the demand for steam and the infrastructure for distributing it.

According to research from Savills, the upward trend for annual growth will continue this year, with farmland values predicted to rise by 40 per cent over the next five years. This is in contrast to prime central London property, which will only witness an average of 26 per cent growth over the same period.

Nevertheless, not all farmland will enjoy the same level of performance, and the gap between prime units and other classes is increasing. Alex Lawson, director of farms and estates, explained: “It is no longer a case of one size fits all and there are now clear divergences in value between the prime quality, well located blocks of arable land and the rest, which are likely to widen further. Across all property asset classes the economic uncertainty has pushed investors towards quality and farmland is no exception.”

The sale of secondary and tertiary land will depend on reasonable pricing, despite the limited supply of prime farmland and high demand. The difficult agricultural environment will also put pressure on the sector, with the industry experiencing dramatically lower yield and the livestock sector incurring higher costs for housing animals. Consequently, average farming incomes are expected to decline in 2013, albeit marginally.

Nonetheless, farmland values are still increasing, with the Knight Frank Farmland Index Q4 2012 report showing that average values in England rose by almost three per cent in the final quarter of the year. This means that farmland can be expected to fetch an average of GBP 6,214 per acre. Andrew Shirley, head of Rural Property Research, stated: “English farmland’s bull-run is not yet over, despite the impact of the horrific weather on farming profitability this year. The market proved resilient in 2012 and is predicted to gain further ground next year.”

• Source : IPN Global
• By +Peter Mindenhall
• Tuesday 22 January 2013

Commodity shares are likely to have caught the attention of contrarian investors. Despite positive developments – including gas discoveries in the US, renewed consumption in China and a gold price bounce – many resources-related stocks and funds fared poorly last year.

It is fair to say 2012 was a mixed year for wine investors. The Liv-ex Fine Wine 100 finished 9.6 per cent down on the year and struggled in particular up until July, when notably Vin-x called the market and issued the statement in the trade press that they felt that the market had bottomed. The 2011 crop was not a good harvest and en primeur pricings suffered as a result, the early commentary on the 2012 harvest is it is expected to be small and one we are approaching with caution. A further dynamic was the slowdown in Asian investment as the Chinese economy stumbled somewhat.

It was of course not all bad for investors; the 2009 vintage achieved record scores from Robert Parker at the end of February 2012, marking it as the most out-standing vintage of modern times. Positive steps were taken to tackle the problem of fraud within the industry with the announcement of the launch of the Wine Investment Association (WIA), a new self-regulatory body, in November. Certainly in 2013 investors can look for firms with the WIA stamp and feel safe that they can invest with confidence.

Despite the negatives, the final quarter of 2012 saw a solid period of stabilisation and in a perverse way, the coming together of the negative factors on the market has provided extremely fertile ground for wine investment for the year ahead. Equally the history books provide evidence that following a market correction wine investment then enjoys a strong period of growth, precisely what happened in 2008.

Most importantly the correction in the market has brought prices down to a level at which some of these offer serious value, particularly the blue-chip First Growth wines such as Margaux , Haut-Brion and even Lafite. A number of First Growth back-vintages are significantly underpriced against trading highs of eighteen months ago, as a result there are some excellent opportunities for investment with the market poised for an upward ride. Certain vintages will always excite investor interest, 2005 for example is recognised as a year with a safe and strong reputation with some market commentators suggesting that Robert Parker underscored the vintage that year, meaning there are some gems to be discovered.

Parker will taste and score the 2010 vintage in early spring before it goes to bottle and given the significant effect of the scoring last year on 2009 wines, where £100million in value was added overnight to the vintage. There will be great anticipation for the 2010′s which at initial scorings were reckoned to be on a par with the ’09s in potential. Vin-X clients have invested in 2010 en primeur and are now positioned for any movement, in particular Pontet Canet and Pichon Baron are expected to be shrewd purchases. For those who have not yet taken a position there could be value in acquiring 2010s en primeur now before the scores are released.

Liv-ex, the marketplace for professional buyers and sellers of fine wine, is providing statistics to back this optimism up. Having studied the top 30 wines, Liv-ex has shown it has provided an average return of 14.9 per cent compound year-on-year over the last 20 years. Yet based on their current data charts and the market correction, it is suggesting that we could be looking at as much as 17.6 per cent returns for the next five years. Liv-ex reports on the 15th January that current activity is looking very positive with the value of bids on the market reaching an all time high totalling £7.9 million that week, the previous high was £7.5million in February 2011 and the total number of bids hitting a three-year high. This performance, on top of the 3.4% increase in the Liv-ex Fine Wine 50 over the last two months, are clear green shoots at the start of 2013.

We are strongly optimistic of a good year at Vin-X in 2013; with the stabilisation of the fine wine market and early indicators of a return to consumer confidence including the fact that the Asian market is still buying and will continue to grow, we believe it really is a great time to buy and are hopeful of double digit returns in 2013.

• Peter Shakeshaft
• Founder of Vin-X Limited, the fastest growing fine wine investment specialist in the UK
• Follow Peter Shakeshaft on Twitter: www.twitter.com/vinxfinewine

It follows warnings from the country’s Court of Auditors that bullion held abroad had “never been verified physically” and was not under proper control.The Bundesbank is to recall its reserves as leverage against future currency fluctuations, resulting in pulling a chunk of its holdings from New York and all its bullion from Paris.The price of gold per ounce rose $14.50 to $1,682.60 by mid-morning today.

Demand soared during the financial crisis as investors first sought gold as a safehaven and then because it can be a hedge against inflation. The price rose more than threefold between 2007 and late 2011 – from around $600 to a peak of $1,895.”Gold bugs” say the world is moving towards a de facto gold standard again as China, Russia and other reserve powers boost their holdings to diversify out of dollars and euros.But gold’s rise was more modest in 2012, up by 8pc in 2012 but gold-related equities did not fare so well. Some investors fear gold assets, such as gold mining companies, may be seized in less stable countries.

Investors in the £1.6bn JPM Natural Resources fund, which largely invests in gold miners, lost 13pc of their money over last year and other gold, mining and commodities funds also suffered: Investec Global Gold fell by more than 10pc and BlackRock Gold & General is down 13.6pc over the past 12 months. The Carmignac Commodities fund also suffered from its exposure to gold stocks, but the managers are optimistic about the outlook.

“We believe global monetary growth will benefit gold over the long term. This is why gold stocks still account for nearly 16pc of Carmignac Commodities,” said Didier Saint-Georges of Carmignac. “We introduced Argonaut Gold, a Canadian gold company with a healthy balance sheet and strong earnings.”

Wealth manager Brian Dunnehy of FundExpert.co.uk this week urged investors to sell gold buillion and buy gold mining shares. “As central banks crank up the printing presses, gold is neither a safe haven or an inflation hedge,’ he said. “But central bank largesse could trigger a significant bounce in gold mining shares.” “Before Christmas, when the US Federal Bank announced continuing massive money printing, gold should have soared – it didn’t. But that same central bank largesse can trigger a significant bounce in the shares of gold mining companies in 2013. The large deflationary waves, from demographics and huge debt piles that governments refuse to tackle could keep a lid on the gold bullion price for sometime.”

But not everyone is pessimistic about the forecast for bullion. In October BlackRock fund manager Evy Hambro, predicted that the third wave of quantitative easing could result in the gold price hitting US$2,400/oz by the middle of next summer, and the Central Bank in South Korea has doubled its bullion assets over the past year, purchasing 16 tonnes in July alone.

Aside from gold funds, if you are looking to add the precious commodity to your portfolio, we outline your options below.

Gold Bars

Bars come in metric sizes, and are based directly on that day’s gold price, plus a premium for manufacture and marketing. The smaller the bar, the bigger the premium.

Gold coins

Twenty-two carat gold sovereigns the favourite of British investors. Sovereigns dating from about 1887 and up to 1982 are currently considered the best investment. Bullion coins recognised as UK legal tender are exempt from capital gains tax.

Another coin option is to buy South African Krugerrands. The smallest is a 0.1oz coin, which costs about £125 at the time of writing.

The specialist website Money Week has a directory of bar and coin dealers.

Exchange-traded funds

ETFs are funds, traded on a stock exchange like shares, that allow investors to track the performance of particular indices or a commodity, providing the investor with the same returns as this underlying market.

ETFs are available for gold, silver, platinum and palladium. ETFs can be traded daily – all you pay is the dealing charge of around 0.4pc, or £7 per trade.

ETFs are increasingly the most popular method of gold investment. Research by Source, a provider of exchange traded products, shows that inflows into European gold ETPs reached $6.8bn in 2012, constituting staggering 15.4pc growth.

Gold accounts

Gold bullion banks offer two types of gold account – allocated and unallocated. An allocated account is effectively like keeping gold in a safety deposit box and is the most secure form of investment in physical gold. The gold is stored in a vault owned and managed by a recognised bullion dealer or depository.

With an unallocated account, on the other hand, investors do not have specific bars allotted to them. Traditionally, one advantage of unallocated accounts has been the absence of storage or insurance charges, because the bank reserves the right to lease the gold out.

You can of course buy individual shares of companies that either trade or mine gold.

Gold certificates

Historically, gold certificates were issued by the US Treasury from the Civil War until 1933. Denominated in dollars, the certificates were used as part of the gold standard and could be exchanged for an equal value of gold.

Nowadays, gold certificates offer investors a method of holding gold without taking physical delivery. Issued by individual banks, particularly in countries such as Germany and Switzerland, they confirm an individual’s ownership while the bank holds the metal on the client’s behalf.

The investor avoids storage and personal security problems, and gains liquidity by being able to sell portions of the holding by simply telephoning the custodian.

The Perth Mint also runs a certificate programme that is guaranteed by the government of Western Australia and is distributed in a number of countries.

Jewellery

While thousands of items of gold jewellery change hands every year, they are not considered serious investments.

India devours 800 tonnes of bullion, more than 30pc of annual global gold mine production, mostly as jewellery. But although over the long term these jewels should hold their value and rise in line with inflation, manufacturing costs and the jewellers’ markup mean they would sell for a fraction of the purchase price for the first few years of ownership.

What is the gold standard?

Britain effectively moved to a gold standard in 1717 when the government linked the currency to gold at a fixed rate. All major countries, other than China, switched to the gold standard in the late 19th Century, linking their own currencies to gold.

Britain later dumped the standard during the First World War only to return to it in the 1920s.

The gold standard was further strengthened by the 1944 Bretton Woods Agreement, which created the International Monetary Fund and an international monetary system linking national currencies to the U.S. dollar that was convertible into gold.

The gold standard abandoned in 1971 by President Richard Nixon. The era of fiat money began at that point, allowing currencies to fluctuate based on confidence and more influenced by domestic monetary policy.

Source : The Telegraph

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• By Emma Wall
• 11:55AM GMT 16 Jan 2013