Real Wealth in Your Hands

Protecting your portfolio with physical gold could be the ultimate insurance for turbulent times

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“In uncertain times, physical gold offers about as much certainty
as you can get.”

“Six times to save the world!” screamed the headlines in September, as the
economic meltdown in the Eurozone showed no sign of resolution and
global markets plummeted again.

The expectation of an imminent world banking collapse may be a minority
view, but it is increasingly held. On a national scale it has happened many
times before, for example, in Germany, Russia and Argentina. For private
investors it poses the oldest question in the world – where is their money
really safe? And growing numbers are choosing the oldest answer: physical gold .

“In Germany and Austria, where economic collapse and hyper-inflation happened within living memory, holding gold bars and gold coins is fairly common, and it’s always been seen as a safe haven for wealth in India,” says Rob Halliday-Stein, managing director of BullionByPost, the UK’s market leading supplier of physical gold.

“We’re offering investors the ultimate insurance. It gives people physical control and ownership over part of their wealth. It’s quite different from handing over money to a fund manager – or even, these days, leaving it all in a bank account.”

The price of gold tends to rise as investors in other markets get the jitters, says Halliday-Stein. “If you visit the BullionByPost website – www.bullionbypost.co.uk – you can see that the gold price began rising sharply in August 2007, just as news of the banking crisis started to break. It’s more than doubled in the last three years, and more than trebled in the last five.”

As the buying power of savings is eroded by low interest rates and high inflation, and currencies are devalued by repeated rounds of ‘quantitative easing’, owning physical gold may be a way of preserving the value of your money, says Halliday-Stein. However, as he is careful to point out, this does not necessarily mean that physical gold is a good speculative investment. The gold price tends to fall back as economic conditions improve, and can even do so as they worsen – as happened in September this year. Anyone wishing to speculate short-term on the gold price can consider exchange-traded funds (ETFs) or contracts for difference (CFDs) which track the price of gold. But this kind of ‘paper gold’ is of no value if the fund owner goes bust or the banking system fails, says Halliday-Stein. Ultimate security comes from having a bar or two, or a purse of sovereigns, in your bank deposit box or under the bed.

“It makes sense to hold at least five to ten per cent of your liquid wealth in physical gold for the long term,” says Halliday-Stein. “It performs a very useful function as an asset of last resort as part of a balanced portfolio.”

BullionByPost’s typical customers are not billionaires, but small to medium investors. They have savings – Halliday-Stein does not advise borrowing to buy gold – but can range from owners of businesses to modestly wealthy retirees.

“For most people 100g gold bars, costing around £3,600, are the best investment,” says Halliday-Stein. “Even if you wanted to buy several kilos we would recommend 100g bars. The price is slightly higher than kilo bars but it’s much more flexible when you sell them.” For smaller units, coins are very popular, with a sovereign (containing 7.3g of gold) costing around £270. The premium – the price you pay above the global ‘spot’ price of gold – is a few percent higher, but because they are British legal tender, sovereigns and the larger Britannia coins are exempt from capital gains tax, making them very attractive to wealthy investors.

BullionByPost will buy the gold back at 98 per cent of the global spot price but, of course, buyers are free to sell it anywhere. Movement of gold is unrestricted in the EU and to many other countries.

Despite being about 50 times cheaper than gold, silver is less suitable for this kind of ‘insurance’ investment, says Halliday-Stein. It attracts VAT – unlike gold, which is exempt – is much bulkier to store, and the volatile price makes it a more speculative buy.

“Don’t think, ‘I’m not rich enough to buy gold so I’ll buy silver’,” says Halliday-Stein. “In uncertain times, gold offers about as much certainty as you can get.”

Based in the Jewellery Quarter of Birmingham, BullionByPost offers free, fully insured, next-day delivery as standard on its full range of gold and silver bars and coins. The company is a Royal Mint authorised distributor and only sells London Bullion Market Association approved bars.

Visit the BullionByPost website: www.bullionbypost.co.uk or call 0121 634 8060 .

Published 6 November 2011 | The Sunday Telegraph | Precious Metals Report

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