Credit crunch fears means investors looking to gold

The global credit crunch saw the collapse of US banking giant, Bear Stearns, over the weekend. The news raised fears in stock markets around the world which has resulted in investors looking to gold, which has often been seen as a more stable and reliable asset.

The precious metal has raked in over $1,000 per ounce over the last week - a record high. Since the US sub-prime crisis broke last year, gold has become a popular alternative to traditional shares. Furthermore, investment in silver, platinum and palladium has also increased considerably since late last year.

In spite of the FTSE 100 being down 84 percentage points at the close of trading yesterday, interest in gold was strong. High oil prices and the weak dollar have also pushed up the price of gold.

Mark Dampier of Hargreaves Lansdown said gold is attractive in an economic downturn because you can’t default on it and unlike money, you can’t just print more of it. The finite supply at a time increasing demand also pushes the price up further.

With the problems at Northern Rock still fresh in investors minds, many see gold as a good investment.

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