Where is your gold?
When I was in London in December, I had the opportunity to speak with an expert on rare and old coins. He showed me a rare Roman coin, with the face of a long-dead emperor still clearly stamped into the metal. He also scattered Viking coins and others from a variety of different periods in Europe on the table between us.
After years of staring at computer screens, watching stock prices rise or fall on a chart, it was almost a surreal moment to hold those coins in the palm of my hand, to feel their weight.
There was no doubt, in a world of fleeting paper profits, what I was holding in my hand was true wealth.
And I’m not the only one who thinks it’s time to get a little more physical with our wealth…
gold in your pocket
The demand for physical gold is on the rise. The World Gold Council revealed that while overall gold demand in the first quarter fell 18% from the same period a year earlier (with the first quarter of 2016 being the strongest first quarter in the history of demand for gold), demand for gold bars and coins increased by a healthy 9% to 290 tons.
What’s more, Bloomberg recently reported that two firms have plans to open new vaults in Europe capable of storing more than $112 million worth of gold.
BullionVault revealed that it added three tons of gold in the last 12 months, bringing its total holdings to almost 38 tons.
The Bank of England, which stores gold for the UK Treasury, other central banks and private companies, has added 6% to its holdings since the start of 2016, bringing its total holding to 5,067 tonnes in February.
As you can see, more investors are adding physical gold to their portfolios – gold ETFs just aren’t going to cut it when you consider the fees associated with ETFs.
And what would you prefer in times of turmoil: paper earnings or the weight of a gold coin in your hand?
Many investors around the world are adding physical gold to their assets for three main reasons:
- Increased inflation. We are starting to see signs of inflation in the US and across Europe. In the past, we have seen the price of gold rise along with inflation, allowing investors to preempt their bite.
- Negative interest rates. While not a problem in the US, a part of the world is still struggling with negative interest rates. And instead of turning over more of their wealth to banks, investors are opting to invest their cash in physical gold. (And given that US interest rates are still low, gold potentially offers a better return.)
- Geopolitical uncertainty. Questions about the health of the economy, the duration of the bull market, the fighting in Washington, the terrorist attacks, the elections and more have left investors on edge, waiting for the next black swan event to come along and crash the market. . In times of chaos and destruction, gold is the safety net you want to have. Stocks crash and bonds implode. Gold maintains its value and even goes up.