Wealth Management

12 Days of Christmas: Five Gold Rings

On the fifth day of Christmas my true love sent to me, five gold rings. We mark Day 5 of the 12 Days of Christmas, with the five rings made of the yellow metal, gold. Gold is a precious metal that is popular as an investment option and often viewed as an effective safe haven.

12 Days of Christmas: Five Gold Rings

You will know if you have ever sung the song of the '12 days of Christmas', that after singing "five gold rings” you can take a well earned breather.

It is thought that the five gold rings may not in fact be literally gold rings but may refer to ring necked pheasants, which were very popular in the UK at one time as game birds. Gold is however still symbolic of this fifth day of Christmas in our minds.

Of all the precious metals, gold is always most popular as an investment due to its value, perception as a safe haven and a hedge against inflation. It’s a physical asset, not easily created or destroyed, and expected to broadly keep pace with inflation over the very long term.

Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is still subject to as much speculation and volatility as with other markets. Compared to other precious metals used for investment, gold has been the most effective safe haven across a number of countries. This has ensured that the price of gold has increased over 500% in the last 20 years (as the graph below shows for the all time price of gold).

Gold Price (All Time) - Source: The Royal Mint (royalmint.com)

Aside from buying physical gold, there are two main ways of investing in gold, Exchange Traded Commodities (ETCs) and gold mining shares. The Rosecut view is that gold should form part of a portfolio and as such we also have a gold mining ETF as an option in the thematic part of our own portfolios. To find out more you can email us at [email protected].

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies.

If you would like to read the previous article for the fourth day of the '12 Days of Christmas: Four Calling Birds' please click here.