Gold And Bonds: Too Seductive For Investors



Investors attracted to safe havens

Investors attracted to safe havens

In the current state the financial markets find themselves in, it is no surprise that investors are feeling on edge about their investments. These concerns are only amplified if they have chosen the equity market as the place to make their money work for them, interestingly what has been witnessed throughout the recent past is investors moving into safer markets.

Busy with new investors

The bond market is one which has been overwhelmingly busy with new investors and the ramifications of this has been a fall in yield that can be gained from the bonds, this is down to the simple law of supply and demand.

Looking at 2011 in its entirety gold and bond exchange traded funds have become go to choices for investors in the United Kingdom, again this is completely due to investors not looking to risk their money in high volatility products.

Gold will always be a strong market and together with the bonds they offer investors some protection from the crisis in the single currency region and the implication that has had on the economy in the UK.

The top 10 choices for investors this year really reflects the defensive approach many have taken, which has given rise to gold and fixed-income products. Gold products made up three of the top 10 London-listed ETF’s which investors purchased while bonds made up another four places, with information coming from iShares.

In total the three most popular gold products generated inflows of around $1.7 billion, the most sought after of the gold products was the physical gold ETF which was offered by Source and this produced $1.05 billion. This was closely followed by ETF Securities physical gold ETC which amassed $379.3 million.

Investors jumped into the bond market as if it was a cold pool on a hot summers day, looking for both higher returns and more safety from low rates and increasing market fluctuation. The increased volatility is reason investors are looking to the bond market, where they will get a guaranteed return and the reason towards the gold market is not to dissimilar.

Bank of England

The Bank of England are looking to increase their asset purchasing scheme and are actively looking for ways to expand quantitative easing in 2012, with this in mind many investors are displaying a demand for and ETF which will open them up to the impact of the UK gilts market.

With the economic situation not looking at solving anytime soon, investors will not be willing to risk their finances in products which will increase the risk to their investments.

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