Coupled with this demand is the reduction in the supply of gold scrap for
recycling.

What are investors’ routes to owning the commodity?

Some use exchange-traded funds such as ETF Securities’ Gold Bullion
Securities. Shares in these can be bought and sold via stockbrokers, as with
any other shares.

Another route is through trading platforms such as The Real Asset Company
(therealasset.co.uk) or BullionVault (bulllionvault.com), where gold bullion
can be bought or sold in small units and is stored in secure vaults on
owners’ behalf.

These services have seen a recent increase in investment. Adrian Ash,
BullionVault’s head of research, said: “Total inflows of money last week,
from investors ready to buy gold or silver, were the strongest since the end
of June.”

The platform, which is the largest online provider of bullion and where
clients’ gold holdings total almost £1bn, uses an index to measure the ratio
of owners wanting to sell against those buying. When the reading exceeds 50,
there are more buyers than sellers over a monthly period. The index was
above 50 for all of 2011 and 2012, dipping into sub-50 “seller” territory
only briefly earlier this summer. It now stands at 54.

Mr Ash said: “The Syrian crisis adds to the worries. September typically sees
strong gains. The end of the holidays has acted as a starting gun for price
gains 10 times in the past 12 years.”

Investors can also turn to shares in gold mining companies or, more commonly
and at less risk, unit trusts or other funds investing in a portfolio of
these shares.

Ben Willis of advisers Whitechurch Securities said investors should back an
experienced fund manager such as Evy Hambro, who oversees the respected
BlackRock Gold General portfolio. “A fund investing in gold shares
will not track the gold price but you will be subject to the vagaries of the
stock market,” he said.

During the past five years this fund more than doubled investors’ money – only
to fall back nearly to where it started. It rose by 120pc between September
2008 and 2011, but the subsequent slump means total five-year returns are
just 6pc. It has, however, made a partial recovery in recent months.

Other established gold and commodities-focused funds include SW Global
Gold Resources and Investec Global Gold. A specialist fund targeting
smaller producers is MFM Junior Gold. This has risen by almost 15pc over the
past month, but it was hit by the previous sell-off. Investors should note
that those who backed it three years ago have lost 66pc of their money.

Gold Aim stocks best sellers in August

Gold mining minnows have been one of the most popular
areas of London’s alternative Aim stock market since rules were relaxed
last month allowing private investors to hold Aim-listed shares inside their
Isas.

The number of trades in Aim-listed shares doubled following the change,
according to Interactive Investor, the online trading platform. Four of the
20 most bought Aim stocks in August were gold miners, it said.

The most popular gold stocks bought for Isa portfolios in August were Condor
Gold, Amara Mining, SolGold and Red Rock Resources. All four stocks have
leapt over the past month, with Red Rock Resources rising by 205pc from 0.4p
to 1.22p.

Other commodity-focused Aim investments also proved popular in August,
particularly oil exploration companies. Popular stocks included Xcite Energy
and Range Resources. Top of the pile was Gulf Keystone, the small oil
company, which was the top-selling Aim stock in August, during which its
price climbed by 3pc to around 178p.

Outside commodities, more recognisable Aim names such as Asos, the online
boutique, also proved popular.

Rebecca O’Keeffe of Interactive Investor said: “Many of our more engaged
investors have a bias toward commodity stocks, and these exploration stocks
are highly correlated with the underlying commodity prices.

“Earlier in the year gold and miners’ prices were driven sharply lower by the
prospect of higher US interest rates in light of the likely tapering of
quantitative easing. However, recent events in Syria have seen gold prices
rise again as increased tensions in the Middle East have prompted the market
to introduce a ‘geopolitical risk premium’ into the price.”

The Isa rule change is attractive to certain investors because it allows them
to benefit from the inheritance tax breaks attached to Aim investments as
well as the other tax advantages associated with Isas.

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