ALL THAT GLITTERS

Tiffany Gervaise-Brazier explains the benefits of investing in precious metals

JEWELLERY can represent so many things. A symbol of love, a sign of commitment, a mark of a milestone or a celebration of an achievement, but it is rarely seen as an unemotional investment. 

For many, the uncertain economic and political landscape (be that nationally, internationally or globally) makes investments outside of money in the bank seem risky or complicated. The headlines from the past decade are simply too hard to ignore, but perhaps if you were investing in something that you could see and touch every day, then suddenly that might not seem quite such a leap of faith.

Jewellery, or rather the metal component, whether that’s gold, silver, platinum or palladium or any precious metals, is arguably one of the oldest investments known to man (or woman) and of all them, gold is the most widely used for investment. And yet, it is still thought by the World Gold Council to account for only 1% of the value of Western world investors’ holdings of bonds and equities. 

Sophisticated investors and billionaires across the world will undoubtedly have exposure to precious metals in their portfolio because they believe it is not only a sound investment but also a great way to diversify (spread) risk. However the truth is that you really don’t need to be wealthy to be able to invest in precious metals in the form of bullion, as it is known in the industry. For us in Guernsey, this has become even more accessible through BullionRock, which became part of Ravenscroft last year.

Bullion is a bulk quantity of precious metal measured by weight, defined by purity and typically cast as bars and coins (with platinum and palladium coins being rarer than gold and silver ones). Bullion bars meanwhile can come in a multitude of sizes, ranging from 10 grams right up to 30 kilograms. 

While some coins are classed as legal tender (a Royal Mint gold Britannia having a £100 face value, for example), you wouldn’t want to use them to buy your weekly shop at the supermarket, because their real value is based on their precious metal content, which fluctuates daily. Aside from the Britannia, other well-circulated gold coins are the South African Krugerrand, Canadian Maple, American Golden Eagle and the, smaller, British Sovereign. Buying coins could be the perfect way to dip your toe into owning precious metals and we see people buying not only for their own investment portfolios but also as gifts for weddings, christenings, milestone birthdays and significant achievements. To me, giving bullion just seems far more personal than writing a cheque.

Once you have started investing, there may well come a point when you need to consider how you store your bullion – we definitely don’t recommend keeping a kilo of gold (worth currently some £31,000) in your sock drawer. Storage in a safe inside your property is absolutely fine, but you should definitely check your household insurance policy first. Many investors with larger holdings in precious metals opt to store at BullionRock’s state-of-the-art vault at an undisclosed location in Guernsey, often at a fraction of the cost of holding it at home.

Precious metals are best regarded as a long-term investment as prices fluctuate day to day. As I alluded to earlier, investing in recent years has been against a backdrop of uncertainty, so does choosing precious metals guarantee a return? Over the last 10 years, the price of gold has been less volatile (in other words, the price hasn’t gone up and down as dramatically as other investments have) and of course, no matter what the global economy does, you will always have your bar or coins. 

As with all investments, it’s impossible to give guarantees of a return but there are some important facts which point towards it being a sensible, long-term investment to consider, depending on your investment objectives and time horizon:

  • The discovery of new gold reserves is shrinking year by year, and production is, at best, static (reported output peaked in 2003)
  • 37% of gold is recycled rather than new 
  • Platinum is in demand from industry and is very scarce (80% derives from South Africa) 
  • Palladium, also used in cars, dental and chemical products, is 15 times rarer than gold
  • China and India now represent 50% of the world’s holdings of gold and other emerging markets are increasing their purchases. China and India alone will contain 40% of the world’s middle-class purchasing power by 2030 and they have a cultural affinity for the precious metal. The Indian wedding season alone creates a seasonal uplift in worldwide jewellery consumption.

In a world where consumption is rising, don’t just take my word for it when considering investing into precious metals, as in the words of Kenneth J. Gerbino of Gerbino Gold Group: ‘If you don’t trust gold, do you trust the logic of taking a pine tree worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?’