Historically, gold has proven to be a very safe investment – could it remain so in times of a global debt bubble, Brexit and an uncertain world economy?
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.
The words of the witty Irish playwright and philosopher George Bernard Shaw, will resonate with investors in Ireland today given the UK government’s handling of Brexit and the rise of Trump and other radical politicians on the left and right.
Populist politicians are creating increasing political, economic and financial risks for us all. This is clearly seen in the complete mess that is Brexit – for Ireland, the UK and indeed the EU.
Shaw was a keen student of history and saw the economic problems that monarchies and governments have created over the years. Only the most foolhardy investor would claim that the coming years will be any different than our past.
Gold’s safe-haven historical status
A massive global debt bubble, Brexit, the risk of Italy leaving the EU, an increasingly fractured EU, aggressive Trump foreign and economic policies and an increasingly polarised and uncertain world cast shadows over our economies and financial markets.
There are very real risks posed by the gigantic global debt bubble – the world is nearing $250 trillion in debt and the global debt to GDP ratio has risen to 320%.
Shaw was also alluding to gold’s safe-haven status throughout history. Paper currency devaluations and indeed stock, bond and property market crashes are much more common throughout history than many people realise.
Gold has protected people from war, recession, depressions, inflation and currency devaluations. History clearly shows this. There have been numerous stock and property bubbles in the last 100 years. When they collapsed those that did not have all their eggs in the one basket and had diversified and owned some physical gold protected and indeed grew their wealth.
It has not been enough to simply own gold as on occasion, desperate governments have enacted draconian legislation that allowed them to confiscate their citizen’s gold. Roosevelt in 1933 and Mao in 1949 are the two primary examples of this.
Movement towards owning physical gold in safe jurisdictions
This precedent and many others involving property and land confiscation, ‘bank holidays’ and nationalisation of strategic assets have seen a trend towards risk averse investors opting for physical gold rather than digital gold in the form of ETFs and “platform gold” or “.com gold” in recent years.
This and the precarious debt position of the U.S., the UK and other large debtor nations has also seen a movement towards owning physical gold in safer jurisdictions.
Investors have been showing a preference for owning gold in wealthy creditor nations that also respect wealth and property rights. Switzerland, Singapore and Hong Kong have been the primary beneficiaries of these gold flows and they remain the favoured jurisdictions of our clients and gold investors internationally.
However, more recently we have had both UK and Irish clients asking us to provide secure storage in Dublin in Ireland and we are now delighted to be able to provide that option for the first time.
Gold’s purchasing track record
Gold has an excellent track record in maintaining its purchasing power relative to currencies and other assets.
Besides history, there is also a significant body of empirical evidence in the form of academic research and research from independent asset allocation experts which shows that gold is an important diversification for investors which reduces portfolio volatility and enhances returns.
Gold is a hedge and financial insurance in an uncertain political and economic world. Gold stored in safe vaults in Dublin and other safe jurisdictions will again act as a safe haven asset when it is needed in 2019 and the coming years.