Gold Shines & Silver Soars but British Funds Beat Emerging Markets

October 16, 2012 at 10:04


Dividends have delivered the lion’s share of returns to stock market investors since the Coalition Government was formed but precious metals did best of all.

That is the conclusion of statistics from various sources as the Government nears the halfway stage next month of its fixed five-year term.

Fears that money markets would punish an inconclusive result to the last General Election proved unfounded as total returns from the  FTSE 100 index of Britain;s biggest shares exceeded 20pc since May, 2010.

Dividends often proved a better bet than hopes of capital gains during the period and the average UK Equity Income fund beat the blue chip index with total returns of 22pc, according to calculations by FE Trustnet.

By contrast, the average Investment Management Association (IMA) Global Emerging Markets fund shrank by 1pc during those two-and-a-half years, when growth of nearly 9pc was required to match the Retail Prices Index (RPI) and preserve the real value or purchasing power of money.

Fears about the impact of inflation on fiat currency or paper money boosted returns from gold, where the bullion price soared by 40pc in sterling terms and by 50pc for dollar-denominated investors. Silver did even better soaring by 80pc in pounds and 91pc in dollars.

Adrian Ash of Bullion Vault commented: “Both precious metals have risen faster since May, 2010, on an annualized basis, than they did during the 13 years of New Labour.

“Now George Osborne is clearly failing to meet his debt-reduction targets, the International Monetary Fund (IMF) is urging a return to deficit spending, and Mervyn King, Governor of the Bank of England says beating inflation shouldn’t be its sole aim. Savers may well fear a return of 1970s-style inflation to match these bell-bottomed policies.”

To put the Coalition period in perspective, neither the FTSE 100 nor any of the major IMA equity sectors managed to match inflation – as measured by the RPI – over the last five years, largely because share prices at outset had yet to reflect the full scale of the global credit crisis.