If you’re still getting to grips with the practice of investing, gold may sound like an archaic choice. After all, we are at a point in time that will be marked in the history books as the “birth of cryptocurrency”, so gold can feel like a step in the opposite direction. But it isn’t, and that’s why assumptions are always best kept at a very far distance from financial planning! Savvy investors the world over treasure their gold right now. In fact, at Hobbs Financial we actively promote diversifying a limited part of your investment portfolio with gold as a hedge Why? OK, let’s get down to the details…
Why invest in gold?
Gold is finite
How much gold do you think there is in the world right now? Keep in mind that gold is finite. Therefore, gold doesn’t renew itself at a rate that will have any substantial bearing during your lifetime, or your children’s lifetime, or your grandchildren’s lifetime or your great grandchildren’s lifetime… you get the idea. The answer is that the total amount of gold mined in human history is estimated to be the equivalent to a 21 metre cubic block. If you’re struggling to imagine what that looks like check out the visual representation below:
Gold performs well over time
In historical terms, this is obvious – gold has proved itself to do a superb job of retaining its value throughout the ages. But what about in the short term? Gold has accumulated at 9% per annum for 15 years against the Euro (2003 – 2018). If we take a look at how the price of gold performed during the terrible crash of 2008, we can see it went from 10.5% to 23.6% in 2009 and then up to 37.1% in 2010. Gold is clearly a stronghold during financial crisis.
The investor’s safe haven
Think of gold as a backstop when things go badly askew like a reversal in global growth causing deflation or when high inflation breaks out. Its purpose is to act as a hedge or insurance when value is being lost elsewhere in your assets. Therefore, if you’re looking for an investment that will protect your investment portfolio in times of crisis, gold is the way to go.
Ideal for wealth diversification
What is important to remember is that gold is money. It is a currency just like paper money. In fact, it is a liquid asset which means it’s very easily converted into its cash equivalent. With all the clear advantages of investing in gold, it only makes sense to include it in your wealth diversification strategy. By spreading your wealth over a portfolio of carefully selected investments, you increase your chance of return and mitigate associated risks. At Hobbs Financial, we recommend that 10% of your liquid assets, including corporate reserves, should be in gold.
“I’ve been adding gold to client balance sheets since 2004, and every year people say the same thing: isn’t gold very expensive now? Gold is never cheap, as anybody who’s ever bought a gold ring will know, but it is not the value of the gold now which is important, but its potential value to a balance sheet if things go badly wrong”
Eddie Hobbs, The Pivot
How to invest in gold
Gold bars and coins
This is how we all imagine gold right? A solid bullion that you can hold in your hand. You can have your investment in this form if you like, delivered to your door in coins or bars. The beauty of this asset class is that there is no need for counterparties between you and your gold. But having gold in your home comes with its own risks, that’s why we would advise taking advantage of vaults with credible custodians such as Loomis in Zürich or Brinks in Singapore. This keeps your gold out of the Eurozone in an insured and audited storage facility. Annual storage costs typically range from 1% p.a accruing based on daily prices for values under €100k to 0.49% above €750k.
However, if you want to keep your gold close to home then we have good news! An international standard gold vault just opened this October in Dublin, bringing top standards in security, authenticity, trading and accessibility to our doorstep.
Perth Mint Certificate Program
The Perth Mint Certification Program is the only Government-guaranteed gold certificate program in the world. The way this works is by the Perth Mint presenting you with a Precious Metal Certificate in your name. This provides you with a unique number to identify exactly the number of ounces of gold you have. This is a secure option if you are considering investing in gold. It is guaranteed by the Government of Western Australia and, being AAA-rated, it has an exceptional degree of creditworthiness. The Perth Mint is independently audited regularly and is fully insured.
Not sure whether investing in gold is right for you?
Although we are advocates of wealth diversification with gold, we always provide financial advice on a case-by-case basis. Therefore, you can be sure that our financial advice is tailored to you with your best interests in the driving seat. If you would like to find out more about gold, wealth diversification or just general financial planning, make sure to get in contact with us today.
Gold in the forms above, much like land, collectables, art, etc. is not a regulated financial product and this activity is not regulated by the Central Bank of Ireland, nor covered by the Investor Compensation Scheme or by the Financial Services Ombudsman scheme.