Investors are continuing to see gold as a safe haven amid the economic turmoil and are using it as a means of diversifying their portfolios, it has been claimed. According to Mark Harris from New Star Investment Funds, demand for gold has increased strongly as investors seek resilience in a volatile climate. He said gold remains somewhat insulated from economic cycles, which means its price tends not to fluctuate in the way that the value of assets such as equities does. There is also no credit or default risk associated with gold and investors like the idea of holding a physical asset "It is this stability and lack of correlation with other asset classes that has led to the increasing popularity of gold as a portfolio diversifier, both for institutional and retail investors," said Mr Harris. He said that while gold has slipped in price from a high of around $1,110 an ounce in March to $877 at the end of September, it nevertheless remains less volatile than many other commodities. He also pointed out that experts at the London Bullion Market Association meeting in Kyoto have predicted that prices will increase again to around $958 by November next year. According to data from Clerical Medical, gold prices have risen by eight percent since the start of the credit crunch. At the same time, the FTSE 100 has declined by 28 percent.

Source