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Thinking about investing in precious metals to protect against inflation?


The Royal Mint, the UK’s home of precious metals, has today revealed new data showing how more UK investors are moving into precious metal investments at The Royal Mint, such as gold, as market uncertainty remains.

As investors adjust to an increasingly uncertain macroeconomic picture, The Royal Mint saw a near 26% uplift year-on-year in the volume of gold investments during 2022. Gold bar investments in particular increased during the 12-month period, with sales rising by 33.5%. The increase in gold investments was driven by Gen-Z and Millennial customers who increased their volume of purchases by 38% and 29% respectively in 2022. Demand for precious metals remains high at The Royal Mint, as more investors look to add precious metals, including gold, to their portfolios.

Boom in gold and precious metals investing may be here to stay

A new poll of over 2,000 UK investors, undertaken by The Royal Mint, shows this trend is set to continue as one in four investors (23%) plan to invest in gold this year, rising to 26% among Gen-X investors. The research reveals that precious metals is the second most popular investment right now, only behind UK stocks and funds, with nearly a third of investors (30%) planning to invest in the asset class in 2023.

Nearly one in six investors (16%) who haven’t previously invested in precious metals before plan to in the future, further highlighting the increasing popularity of the asset class.

The growing popularity of precious metals is, in many cases, being driven by the increasing investment appeal of the asset class as a potential means to protect portfolios in volatile markets. A majority (53%) of future precious metals investors surveyed said they are motivated to invest by the asset’s ‘safe haven’ status, with many (29%) encouraged by the belief that the asset is less risky than other investments.

Gold started 2023 on a 9-month high in January and hit a 12-month high after events like the collapse of Silicon Valley Bank pushed prices higher. Following the collapse of Silicon Valley Bank, gold prices reached highs of $2,000 on the w/c 13th March, whilst The Royal Mint saw a 230% week-on-week increase in sales of gold investments.

Challenging macroeconomic picture sparks greater awareness around investment risk

The research further shows how market uncertainty, and the global macroeconomic picture, is making UK investors more risk-conscious when it comes to their investment portfolios. A majority of investors (52%) said they were worried about market volatility impacting their portfolio this year, rising to 58% among millennial investors. Over half of UK investors (55%) said they are worried about inflation impacting their investment portfolio this year.

Growing awareness of risk among investors is being underpinned by negative sentiment around financial markets. One in three (34%) UK investors said they are pessimistic about markets in 2023. Nearly half (48%) of UK investors said they were worried about their portfolio losing money this year.

So far this year, gold investors have benefited from a weakening dollar, which is pushing gold prices up by 6.6% in year-to-date trading (as of 29th March). Research from the World Gold Council has found that gold prices typically fare well during recessions, delivering positive returns in five out of the last seven recessions.

Commenting on the research, The Royal Mint’s Director of Precious Metals Andrew Dickey said: “At a time when financial markets are notably more unpredictable and investors are becoming increasingly aware of risk, everyday investors are taking active steps to protect their portfolios. It is clear from the data that investment risk is front of mind for UK investors, with many looking to add precious metals to their portfolios this year.”

Dickey said that The Royal Mint, is seeing more investors consider, and invest in, precious metals as a potential means to protect their portfolios and attempt to navigate volatile market conditions. “From our experience, gold and precious metals grow in popularity during challenging times for the global economy as investors look to diversify their portfolios and hedge against inflation,” Dickey said. “However, for many risk-conscious investors, these market moments are only a trigger for a long-term investment in precious metals that grows over many decades and retains what many see as its ‘safe haven’ status.”

What to think about before investing in gold

Just as markets rise, they can also fall, so it is important to do your research before investing. Andrew Dickey, The Royal Mint Director of Precious Metals shared some general considerations for those who are thinking of investing in precious metals at The Royal Mint:

How are you going to invest in gold?

When considering investing, it is important to understand the different ways to invest in precious metals. Nowadays, you can invest in physical coins and bars, or otherwise digitally. Each way to invest has its own benefits so it is important to do your research and ensure this aligns with your own circumstances and preferences. Whilst many aspire to owning large gold bars, there are a number of ways to invest including more affordable routes such as owning fractional amounts via digital gold products like DigiGold.

Understand the premiums on physical metals

Most forms of precious metals investment normally include a ‘premium’ on the product. This is the percentage which is charged for the product over the price of the metal which it contains. Due to economies of scale, smaller products tend to cost slightly more to manufacture, package and distribute. If premiums put you off investing, you could consider investing digitally which should reduce the premium.

Know your tax benefits

Bullion coins from The Royal Mint are exempt from Capital Gains Tax for UK residents due to their status as legal tender. In fact, all gold, silver and platinum bullion coins produced by The Royal Mint are classed as CGT-free investments. Investors can therefore make an unlimited tax-free profit on all bullion coins produced by The Royal Mint.

Consider your investment time horizon

As we have seen in recent years, markets can be incredibly volatile, rising and falling quickly. If you are thinking of investing, it is important to consider how long you intend to invest for. By committing to investing over the long-term, you may be able to ride out any market dips and potentially give yourself a better chance of making a profit from your precious metals investment.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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