BREXIT : Gold Providing Protection Against A Fall In Sterling ?

In our house discussions about BREXIT are banned these days. Mrs Norman thinks that the topic is like a faulty lightbulb … too much heat and not enough illumination … and she is right. 

Besides, for most Brits it has also become deeply boring as we have quite frankly moved from 100% saturation on the topic … to beyond. Yet it remains a deeply important story.

Perhaps the Bank of England is, at least, correct in suggesting that there seems to be some complacency around the possible outcomes for a messy divorce. And it is tempting to stray into politics from here … and remember, it is banned … but what does unite most Brits is the belief that the whole negotiation process has been very deeply mismanaged. 

Getting back on message … you might think that with all that uncertainty, that physical gold sales here in the UK would be off the scale. Well it’s not.

Here at Sharps Pixley we have had a stellar year and we shall have sold between 2 and 3 tonnes of gold from our modest bullion showroom before the year is out. That’s a roughly 100% increase year-on-year, and in a tough market. Yet the last two months have been our very worst. Gold remains deeply “unloved”.

So, what could UK investors do to protect their savings against a further fall in sterling. Obvious really, buy gold. 

Gold in GBP terms has risen 30% over the last 5 years, which is a little over 5% pa compounded (over the last 20 years we normally see a 10%+ increase pa compounded, so relatively lacklustre).  

Since 2000 gold has outpaced the average UK property market by more than a factor of two (gold up 456% in GBP, property up by just 182% (Nationwide Index), while the FTSE is up a miserable 10% !) Gold has a tighter bid/offer spread (roughly one quarter for say a buy-to-let) and it is more liquid (5 to 7 minutes to sell gold, 5 to 7 months to sell a property). In our view gold remains the best kept secret in financial markets. No more so than here in the UK where we are just 0.3% of global demand. 

In a get-rich-quick, instant-gratification, tweet-me world, owning physical gold might seem a little retro - but wise heads will tell you that ‘slow and steady wins the race’. With there being a distinct possibility that sterling is headed for a significant fall, owning gold as a UK investor remains possibly the best way to protect your wealth.  

A proper “lightbulb” moment ?

 

04 Dec 2018

About the author

Ross Norman

Ross started his business career with business guru Sir Clive Sinclair of Sinclair Research in Cambridge, before joining Johnson Matthey as Gold Refining Manager (then the worlds largest gold refiners), then as a gold trader at NM Rothschild & Sons (the Chairman of the London Gold Fixing) and later Credit Suisse, where he was a Senior Dealer in physical bullion trading.

Ross has an enviable record within the London Bullion Market in forecasting the gold price over the last decade and is frequently sought by the media for commentary on the bullion markets. Ross has made frequent appearances on TV (BBC, CNBC, CBC) in newspapers (FT. Wall Street Journal) as well as in the newswires (Reuters, Bloomberg and Dow Jones).

e: ross.norman@sharpspixley.com