Precious Metals with Best Returns for UK Investors since Last General Election

on Oct 16, 2012
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While dividends have delivered the lion’s share of returns to UK investors since the Coalition government took over, precious metals did best of all, says Ian Cowie, head of personal finance at Telegraph Media Group in an article published by the Telegraph on October 16.

**Gold, Silver Soar**
Gold and silver have delivered the highest returns to investors in the UK since the Coalition Government was formed, with gold bullion price soaring by 40 percent in pounds and by 50 percent for dollar-denominated investors. Silver was equally impressive going up by 80 percent in pounds and 91 percent in dollars. The Telegraph quotes Adrian Ash of Bullion Vault as saying that both silver and gold have risen faster on an annualised basis since May 2010, “than they did during the 13 years of New Labour.”

“Now George Osborne is clearly failing to meet his debt-reduction targets, the International Monetary Fund (IMF) is urging a return to deficit spending, and Mervyn King, Governor of the Bank of England says beating inflation shouldn’t be its sole aim,” added Mr Ash, as quoted by the Telegraph. “Savers may well fear a return of 1970s-style inflation to match these bell-bottomed policies.”

**Inflation Fears**
Mr Cowie notes that inflation fears have boosted returns from gold in the UK, with investors worrying about the impact of inflation on paper money or fiat currency. In addition, gold price has benefitted globally from the various monetary stimulus measures introduced by central banks not only in the UK, but also in Europe, Japan and the United States, prompting investors to focus on the safe haven appeal of gold.

!m[And British Funds Beating Emerging Market Stocks](/uploads/story/588/thumbs/pic1_inline.png)It would seem that the outlook for gold is likely to remain positive. On October 16, the mining news website Mineweb published the latest gold price analysis of precious metals analyst Jeff Nichols who noted that as long as monetary easing continued, gold was going to move onward and upward.

“We have long argued that bearish economic news is bullish for gold because a persistently under-performing economy pressures central banks to maintain or increase their stimulative policy initiatives,” writes Mr Nichols, as quoted by Mineweb. At the beginning of October, the Bank of England reported that it voted to maintain its programme of asset purchases totalling £375 billion financed by the issuance of central bank reserves.
**Returns Recap**
Apart from precious metals, UK investors have also benefitted from dividends, with Mr Cowie noting that total returns from the FTSE 100 index of Britain’s biggest shares exceeded 20 percent during the two and a half year period. Calculations by FE Trustnet indicated that the average UK equity income fund beat the blue chip index with total returns of 22 percent. The average global emerging markets fund of the Investment Management Association (IMA) on the other hand has shrunk by one percent since May 2010, with nine percent growth being required to preserve the real value of money.
Yet, Mr Cowie notes that during the observed Coalition government period neither the FTSE 100 nor any of the major IMA equity sectors managed to match inflation which is perhaps the reason why precious metals had the most impressive performance.

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