The Rush for Gold

The Rush for Gold

For over 5,000 years mankind has seen gold as a symbol of prosperity, wealth and stability. Across the planet gold plays a distinct role in every major civilization – As Christopher Columbus famously said: “Gold is a treasure. He who possesses it does all he wishes to in this world”.

 

We’re Losing Trust in The Financial System

The 2008 financial crisis has seen gold’s popularity steadily increasing.
The collapse of global markets and banks, most famously Lehman Brothers, and the freezing of cash holdings imposed by the Cypriot government in 2013, have lead to a decline in the public’s trust in the financial institutions and governments that were traditionally perceived as having a responsibility to avert such catastrophes.

 

Why Gold?

There are a number of factors that are driving people to adopt gold as a security measure in face of the failing trust we mentioned above:

  1. Traditionally gold performs well in unstable times, and therefore has a balancing effect on other components of a portfolio.
  2. Gold’s purchasing power has remained stable over the past few decades, especially when compared to most currencies – i.e. while a $100 buy you much less than they did 25 years ago, an ounce of gold still gives you the same buying power it did then.
  3. Gold is the only de-facto “real” global currency backed by its intrinsic value, rather than by a government.

There are other factors, but the bottom line is that gold has always been, and will remain for the foreseeable future, the ultimate vessel for wealth protection value storage.
It’s important to understand that while the market offers many opportunities for investing in gold, we believe that to fully enjoy the benefits that gold conveys investors must choose a physical holding.

 

Why Physical Gold?

The case for physical holdings vs “paper gold”:

  1. The upside price potential is uncapped, but the downside potential is limited due to mining and refining costs. In essence the supply of gold is limited but the demand is guaranteed.
  2. Fully allocated and segregated physical holdings cannot be compromised, however paper holdings can be digitally manipulated.
  3. Physical allocated gold bullion is one of the select assets that have zero counterparty risk as a universally-accepted asset.
  4. We propose that gold is actually more of a currency than a commodity. As such, it’s truly universal and always liquid. Put simply – A gold ingot can be redeemed in cash almost everywhere and always, making it a perfect store of value.
  5. Gold is eternal and can be melted and remelted as required. It’s worth noting that all the gold stored in the World Trade Center in New York, was successfully recovered after the 9/11 attacks.
  6. As a tangible asset physical holdings offer better security than paper contracts. Gold bullion can be moved if and when the need arises.

 

Gold Outweighs Uncertainty

It’s our view that at this time of global uncertainty, prudent investors should diversify and hold between 5% to 10% in gold and other precious metals. We strongly recommend these holdings be kept in physical form, especially if the intention is to hold them for mid to long term.

“…You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold…”
George Bernard Shaw

J.Rotbart & Co