Friday, 10th July 2020

This Month's Magazine
The Case for Gold

The Case for Gold

“Over the last few weeks we have seen some exciting volatility in the world’s stock markets”. State Graydon Associates

One of the core factors causing these large swings is due in part to the political worries on rising inflation and the need to increase interest rates. Holders of paper currencies i.e. US$, such as Central Banks, particularly in oil exporting countries (some of which are unfriendly towards the US), China and Japan, will seek to gradually diversify away from the US$. Part of that procedure will almost certainly be an increase in the percentage of Gold held in their currency reserves.

People are getting hungry for gold again and there just isn't enough to match demand. Renewed global insecurity has sent people rushing into the safe haven of gold and the price has spiralled from $280 an ounce in 2000 to over $800 today.
The reasons for this move to gold are clear...

  • A dollar crippled by deficits - the value of the US dollar has been weakened by America's twin deficits: trade and domestic. Last year, the US posted a $662 billion trade deficit in manufactured goods and government's debt tab weighs in at over $500 billion! Confidence in the dollar is diminishing and the smart money is moving into gold
  • Global insecurity and tension - Iran's announcement of their nuclear program, the bombing in Egypt, the wars in Iraq and Afghanistan, the election of Hamas in Palestine, terrorism in the West...all this uncertainty is pushing investors into the safety of gold 
  • Growing demand for jewellery in Asia - in 2005 the jewellery market absorbed 2,736 tonnes of gold...a massive increase in value. This has come predominantly from the booming Indian economy where wealth is rising amongst the 250 million strong middle class. Chinese consumers follow close behind!
  • Oil prices on a knife edge - oil supply is so tight that prices are reacting violently to news. The recent supply problems in Nigeria and other factors have pushed oil prices to over $70 a barrel.


All these factors have led analysts to predict a steady rise in gold for at least the next 3- 5 years. While the price is at a 25-year high, it is still well below its $800 peak - which, adjusting for inflation, would be around $2,000 today -  and it's one of the few commodities not to have hit an all-time high.

A portfolio should have some exposure to precious metals and you can invest in Gold in a variety of methods, including Mutual Funds,(Merrill Lynch Gold and General fund for example) or purchasing the physical metal from internationally recognised bullion dealers, but one method that is rising in popularity is the Precious metals investment program. One such programme is The Perth Mint Certificate.

Your investment is guaranteed, stored and easily tradeable across the world. The PMC is a way to buy precious metals and have them stored safely in Perth, Australia. You are issued with a ‘’warehouse receiptÂ’Â’ which is non-negotiable but fully transferable and is guaranteed by the Western Australian Government. If you are interested in Precious metals or wish to learn more about this subject, contact Timothy Lock, Investment Director at Graydon Associates. 

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