When things get murky, savvy investors are known to act rationally. And right now, as the UK economy struggles with weak growth, sticky inflation, and political noise, London’s investors are quietly moving their money into places that make more sense. They’re not chasing the latest fad or crypto craze. They’re returning to something simpler: protection, patience, and prudence. That means gold, commodities, and other alternative assets that hold value when everything else shakes.
The problem with traditional portfolios
Most people in finance like to pretend they’re long-term thinkers. In truth, they’re optimists with short memories. The 60/40 portfolio worked for decades until it didn’t.
Bonds don’t protect you when inflation bites and government debt piles up. And when earnings fall or consumer spending slows, stocks don’t save you either. You get hit from both sides.
That’s where we are now. According to the ONS, in late 2024, the UK’s current-account deficit widened to £18.7 billion (2.6% of GDP). Growth forecasts remain flat. Though lower than the 2022 peaks, inflation is still above the Bank of England’s target.
In plain terms, your pound buys less, your bonds yield little, and your equities are volatile. So London investors are asking a reasonable question: “What else can I own that doesn’t fall apart when markets do?”
Why alternative assets make sense
The first rule of survival in this financial climate is to avoid correlation. If all your assets move the same way when trouble hits, you have a ticking bomb.
That’s why investors are weighing alternatives. Commodities, infrastructure, private credit, and especially gold behave differently from traditional financial assets. When stocks tumble and currencies shift, these assets tend to hold or even rise in value.
Gold
Investing in gold is not a passing trend. That’s precisely why it works. It doesn’t depend on management teams, quarterly earnings, or political promises. It’s an inert metal, which makes it the opposite of hype.
Gold has been a hedge against bad policy, reckless spending, and currency decline for centuries. It has outperformed in nearly every period of sustained inflation or geopolitical tension. According to Robeco data, gold returned roughly 28% in 2024, driven by inflation concerns and a weaker pound. Central banks didn’t miss the signal either; global gold purchases jumped 132% between 2021 and 2024, as reported by FTSE Russell.
So while analysts argue over the next interest rate move, seasoned investors are doing what they’ve always done, owning something that holds value when talk gets cheap.
Frank Hoermann / SVEN SIMON/DPA Picture Alliance/Avalon
Derivatives
Not everyone wants to hold bars in a vault. Some London investors trade gold and commodities through derivatives like contracts for difference (CFDs).
A CFD lets you speculate on the price movement of gold or oil without owning the asset itself. It’s a tool that offers flexibility and liquidity to investors when used wisely. Used carelessly, it’s a weapon of self-destruction.
The Financial Conduct Authority (FCA) updated its derivatives rules in late 2024 to reflect their importance in the UK’s market structure. For professional investors, the update had tangible implications. Integrating contracts for difference (CFDs) and other derivative products into diversified strategies made it easier. When used responsibly, CFDs can hedge positions, manage exposure, or access commodities without heavy storage or capital costs.
Why London leads the move
London’s investors are pragmatic by nature. They live close to political, financial, and economic volatility. They’ve learned that waiting for certainty is a losing game.
Several factors explain their move toward alternatives:
- Domestic exposure feels risky. UK equities underperform compared to US markets, while government debt faces credibility concerns.
- Inflation is stubborn. Even after rate hikes, prices remain high enough to erode savings.
- Global diversification is easier than ever. Tools once reserved for institutions, such as gold ETFs and commodity-linked CFDs, are now accessible.
- Sentiment has shifted. The appetite for alternative assets grew among investors because inflation outpaced the returns on bank savings.
In short, London’s smartest investors are insulating themselves from failure.
Practical wisdom for investors
Don’t think like a speculator if you want to follow their lead. Think like a strategist.
- Define your hedging objectives: Commodities or TIPS-type assets make sense if inflation is your worry. If it’s market crash risk, gold or low-correlation funds work better.
- Keep correlation in mind: Alternatives are for protection, so their percentage must be adjusted cautiously. A ten-to-twenty per cent allocation can often achieve the goal.
- Use derivatives thoughtfully: If you can’t explain how a CFD or a fund works, you shouldn’t touch it.
- Mind liquidity: Alternatives carry extra complexity or liquidity constraints. They should form a part of your portfolio, not dominate it. When trouble comes, you’ll want assets you can actually sell.
- Stay aware of macro triggers: Monitoring inflation, central bank policy, currency moves, and growth data is essential. These all affect alternatives differently from equities.
Remember, investing isn’t about excitement. It’s about endurance.
Rationality is the ultimate edge
Markets have continually cycled between greed and fear. What we’re seeing in London is discipline. Investors are moving into gold, commodities, and other alternative assets because they understand the limits of traditional diversification in a fragile economy. Gold is not new, but it remains remarkably effective. London’s investors seem to have learned that lesson well. They’re not chasing returns. They’re protecting purchasing power, waiting patiently for the storm to pass. And that, in uncertain times, is the smartest trade of all.
