Private investors fear future inflationary pressures

Rebecca O'Keeffe, head of investment at Interactive Investor, said: "The surprisingly strong month-on-month rise in RPI inflation (up 0.6%) means private investors and the market in general will remain fearful of UK inflationary pressures as the full effect of monetary and fiscal stimulus measures unfold.

"On a global perspective, the likely future inflationary repercussions of fiscal and monetary stimuli are a focus of attention, in particular for those countries where Central Banks have implemented quantitative easing policies. These policies may have serious long term implications for currencies, markets and ultimately investors as rising inflation will reduce the real yield achieved on investments.

"Investors are actively considering investments such as gold to hedge against potential weakness in G7 currencies and the inflationary ramifications that this would involve - the rise in UK CPI in May after a period of sterling weakness being a striking case in point.

"In general, most retail investors, rather than buy gold directly, will buy it through a commodity-focused investment fund or ETF. For example, you can invest in gold through Blackrock Gold & General, which is one of our most popular funds. This is a specialised unit trust which aims to achieve long-term capital growth by investing in gold, mining and precious metal related shares. The Blackrock Gold fund has seen growth of over 180% in the last 5 years and 15% year to date. Gold and commodities tend to be quite volatile but they are particularly suitable for diversification in a larger portfolio."