Gold looks like a first-class investment in uncertain times, rallying this year amid stock market and foreign currency turmoil. But this booming market still remains closed to many ordinary investors.
Gold prices have gained 18 per cent this year, bucking a two-decade downturn for the precious metal and putting gold back onto the radar screen of major funds and speculative cash desperately seeking refuge from sinking equities, dollar weakness and fears of a repeat attack on the US mainland.
"Gold is a most phenomenal investment but the doors are closed. It's like a football stadium showing the most amazing match but the teams are playing in front of empty seats because no-one is allowed in," said Ross Norman, metals analyst at TheBullionDesk.com.
Apart from gold jewellery, coins, gold mining shares or the odd unit trust linked to gold indices, the options are indeed limited.
Ordinary investors have also been more interested in rallying stock markets since the 1980s, turning their back on gold as a relic from an earlier time.
Global retail physical investment in gold remains tiny compared to stocks and bonds. Albert Cheng, head of retail investment at the industry-backed World Gold Council, estimates that gold investment ranges between 275 and 310 tonnes of the metal each year, roughly worth an annual $3 billion but dwarfed by the daily trillion-dollar turnover in global stock and bond markets.
"The problem is availability. The price of gold has been relatively disappointing in the last 10 to 15 years and that has deteri orated the distribution system," Cheng said, referring to a fall in the gold price from above $400 in the early 1990s to below $260 in early 2001.
"Banks in Germany have the product available but less people were asking for it. So now, the person in charge of selling might n ot know how to sell it... We need to re-educate banks and consumers and that is a very difficult job," Cheng said.
Demand for the metal has increased in Britain after a decision two years ago to remove value added tax (VAT) on sales and purcha ses of the metal and fanned by wilting stock markets since the burst of the technology bubble.
"There's been quite an upsurge in buying gold. There's been greater interest in private investors coming into gold especially as it is now free of VAT," a spokesman for bullion merchants Baird & Co said.
But after the September 11 attacks, many people who wanted to buy gold from their retail bank were turned away, analysts said. "Selling gold through the banking system was not attractive for many years so banks did not pick it up. Only a few gold merchants and coin dealers were selling gold in London. But these businesses often are not structured to deal with the investment product and cannot offer a competitive price. Smaller dealers often have high charges and handling fees and it might not be as viable," said Cheng.
Small investors could also purchase gold on the Internet but cross-border taxes and transport costs made this a less attractive option, Cheng said, adding he had bought one ounce of gold for around $320 online and had had to pay $50 for delivery.
Although the purchase of gold is possible in principle in many countries, this does not mean that small investors can trade it on the market and cash in on changes in the gold price.
"The big bullion banks have shrunk their desks. They are not even serving small industrial clients any more, just central banks and hedge fund managers, the producer base and some whole-sellers," TheBullionDesk's Norman said.
"It needs someone who can electronically organise all small deals and present them to the big trading houses. There needs to be a middle market which can cope with small trades and the credit issues involved," he said.
Most people buying bars and coins at his firm were interested in longer-term holdings and not in actively trading the metal, the spokesman for Baird & Co said.
"For trade on a day-to-day basis, we would not be the people to go to, unless people want to invest a substantial amount," he said.
But Cheng said the gold market had become more volatile and hence more conducive to active trading as well. Some German banks were offering clients securitised gold products. Purchasers leave their actual gold at the bank, receive a certificate and can call their bank with buy or sell orders similar to calling a stockbroker.