By Sarah Griffiths
The price of gold has risen 8% since the start of the credit crunch, in contrast to the ailing FTSE 100 which has plunged 28% in the same period, according to Clerical Medical.
Since August 2007, gold prices have experienced five times the growth compared to the 14 month period before the onset of the credit crunch.
This included an all time high for gold of $1,012 per ounce in March; 59% above the five year average of $593 per ounce. Its price rose by 32% in 2007 which is the biggest annual gain in the past 28 years.
UK inflation has nearly trebled since August 2007 from 1.8% to 5.2% in September 2008, increasing the popularity of gold, which is often viewed as the ultimate store of value, according to the research.
However, gold prices have fallen back by 28% since the March high, due to a stronger dollar and prices are set to moderate. Clerical Medical believes the extent to which gold prices adjust could significantly depend upon the strength of the US dollar in the medium term.
With inflation expected to decline sharply over the coming months and the deteriorating economic outlook poised to stifle gold used in manufacturing, the average price is likely to fall over the next year, the firm predicts.
Martin Ellis, chief economist at Clerical Medical, adds: "Nonetheless, the recent price declines must be put into context. The average price of gold has increased by 149% over the past decade, nearly five times the increase in inflation."
