The Last 5 Years: Gold, Shares, Savings & House Prices in the UK

September 13, 2012 at 07:52


Savers, investors, shoppers and homeowners have experienced widely-varying fortunes since the global credit crisis hit Britain five years ago tomorrow with a run on Northern Rock.

The former building society failed to weather the storm – indeed, none of those that became banks a decade earlier remains independent today – but one asset class has continued to shine as economic clouds gathered. Precious metal prices have soared, with silver rising by 233pc since September, 2007, and gold not far behind with gains of 220pc.

By contrast, the average cash individual savings account (Isa) rate has collapsed from 5.3pc to 0.7pc, according to the Bank of England – largely because of the Bank’s policy of quantitative easing – and the FTSE 100 index of Britain’s biggest shares trades 9pc lower than it did five years ago.

American shares did much better, rising nearly 20pc over the period, and British Government gilt-edged stock did better still; with fixed interest posting gains of 26pc and index-linked gilts delivering 34pc.

Bricks and mortar lagged far behind. The national average house price fell by 20pc, according to Halifax; another former building society that fell victim to the credit crisis.

Meanwhile the cost of credit increased, as Kevin Mountford of Money Supermarket explained: “Despite base rate being cut by 5.25 percentage points since 2007, the average annual percentage rate (APR) on credit cards has increased by 2.03 percentage points, to stand at 17.25pc. Overdraft rates also increased from 17.8pc then to 19.5pc now.”

Against that dismal backdrop, gold looks set to repeat the resilience it demonstrated during the Great Depression, when it was the top-performing store of value.

So Adrian Ash of Bullion Vault is entitled to sound slightly smug. He told me: “Gold offers financial insurance. It can’t be destroyed, and it can’t be devalued. Unlike bank shares or buy-to-let flats that no one will rent, gold has never gone to zero. That has made it increasingly valuable as the credit crunch has become a permanent emergency of zero interest rates and government debt crises.

“Central banks are now funding government deficits with newly-created money. So the fear of inflation is clearly a driving force behind savers turning to gold and silver today.”

To put all the statistics above in perspective, bear in mind you would have needed total returns of 17pc since September, 2007, just to preserve the real value or purchasing power of money against the insidious effects of inflation.