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LAWRIE WILLIAMS: Come a ‘zombie apocalypse’ I’d rather rely on gold bullion – Graham Birch

Gold aficionados may remember Graham Birch who managed the Blackrock Gold and General Fund in its glory days before he gave it up to go farming – someone who got his timing spot on.  But although he may now be a farmer, Graham has kept closely attuned to the gold sector and his views are well worth listening to – particularly with respect to gold bullion, gold ETFs and gold stocks – and even on bitcoin.  His ‘Fireside Chat’ with Michael Rawlinson of Hochshild on the last day of the London Mines and Money conference should have been one of the highlights of the event in this writer’s view.  Graham has been there, done that and come out on top.  He may not have had the drawing power of a Nigel Farage, who filled the conference room on the Tuesday, or a Robert Friedland, but to the investor in precious metals, and gold in particular, his viewpoint is far more relevant – maybe not least because his views very much echo those of this writer, who takes a more pragmatic approach than some analysts who seem to be more driven by emotions!.

The ‘zombie apocalypse’ of the title was a tongue-in-cheek reference applicable to any major financial system crash or war devastation and is perhaps an obvious one.  Which would you rather hold in such a crisis if the economic world around you collapses?  Paper gold in the form of ETFs, gold buried in a commercial vault perhaps in some other country, bitcoin, gold stocks or gold bullion buried in your back garden or held elsewhere safely in your home an d thus readily accessible?  The odds are on the latter – not that Birch doesn’t rate the other options as a part of an investment portfolio accessible under normal economic conditions.

He actually had some kind words to say about gold ETFs – at least those based on bullion holdings – as having transformed the market by making holding gold easier and cheaper than other options.  In his view they made for fantastic diversification in a portfolio.

On the other hand, he was less kind with regard to gold equities as he felt the major mining companies for the most part had done a great job of destroying shareholder value, making them speculative elements in ones holdings.  Yes, they can add spice and sizzle to a portfolio but in the past few years they have tended to underperform bullion. There have been exceptions to this looking at those which had held to a disciplined approach to costs and new mine development expenditure – he named Agnico Eagle and Randgold Resources as two of these, but was obviously disappointed in the stock performances of most of the big names in the sector.  (However he did see some light at the end of the tunnel for these next year, given that most have at last been getting to grips with the negative aspects of their performance and their CEOs are at least beginning to recognise that to keep stock prices up they are beginning to recognise that they need to be responsive to the needs of their shareholders than they have been in the recent past.)

While recognising that gold streaming and royalty companies had mostly performed far better than the gold miners they were working in effect by dealing with the streamers those miners which raised money that way were detracting from their upside potential for shareholders.

He was somewhat ambivalent about bitcoin, but was obviously no great believer in the amazing bitcoin phenomenon.  He noted that it’s only worth what you think it’s worth and falls down as a workable currency and has major weaknesses as a store of wealth.  What would it be worth come the ‘zombie apocalypse’!  Gold bullion may be ‘stable and boring’ in comparison but it tends to hold its value well.

Birch did recognise that in the face of a much-predicted equities crash, gold and gold stocks would not be immune, but – as in 2009 – the likelihood is that they would recover faster and further than general equities.

30 Nov 2017 | Categories: Gold

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