02 February 2018
On Tuesday morning this week I did 15 radio interviews in 3 hours. #jawache
I did this because The Royal Mint asked me if I’d partner with them for a morning to talk to people about investing. They’re keen to start the conversation as they have a new online service which lets you buy gold (and other bling) online in very small amounts and keep it in their vaults. (Which we can assume is safer than buried in plant pots or under the mattress).
I normally don’t work with groups who pay you to talk about their stuff because I have no desire to be a performing monkey who parrots on about how marvellous any given handbag/vitamins/investment fund/blah is for a quick bung of cash. But I was quite intrigued by this because a) The Royal Mint is quite an interesting brand and b) gold is a good thing to have a bit of to diversify your investments. But I’ve never had the energy to get my head around the faff of buying and storing a slice of an ingot!
A golden history
So here’s the lowdown on gold. The first gold coins appeared in 550 BC in the Lydian Kingdom (now modern day Turkey) by King Croesus. Yes, him of “as rich as Croesus” fame. Prior to that, agricultural products were more commonly used as currency. Before adopting precious metals as coinage, the Egyptians liked gold for its bling, and used barley as a store and exchange of value.
Closer to home, politicians and rulers have been trying to spend more than they have and fiddle with the money supply for ages. In the days before the introduction of the utterly incomprehensible quantitative easing, Henry VIII earned his nickname "Old Coppernose" because he added so much copper to what were supposed to be silver coins that eventually it would show through on the nose of his portrait.
Fast forward and in the 19th and early 20th century currencies were typically pegged to gold. You could turn up with a fistful of bank notes and demand gold in exchange. But bank failures during the Great Depression of the 1930s frightened the public into hoarding gold, making this untenable. In the UK Ramsay Macdonald pulled the pin in 1931 after the Bank of England warned him that it was impossible to meet the demands for gold. Over in the States, in 1933 President Roosevelt forbade the banks to pay out in gold and ordered all gold coins in denominations of more than $100 be handed in for the set price of $20.67 per ounce. A month later, the government had taken in $300 million of gold coins.
In August 1971, battered by the cost of the war in Vietnam, Richard Nixon finally cut the link between the US dollar and gold, which was levied at $35 an ounce. Three years later, President Gerald Ford signed legislation that permitted Americans again to own gold bullion.
Gold as an investment
These days people tend to have gold as a part of an investment portfolio because it behaves quite differently to the stock market. This makes sense when you consider its solid, tangible nature. When Trump is getting a bit trigger-happy on Twitter and people fear the bedrock of capitalism (which is ultimately belief in trade, commerce and the absence of anarchy), they quite like the safe haven of an investment which you can see. Bite! Stick under the mattress! It’s the investment equivalent of stockpiling baked beans in the cupboard. Conversely when the stock markets are charging up and everyone’s pretty chipper about the world, gold tends to be unloved. So it’s naturally quite a good hedge, or an investment insurance policy to hold, although I personally think we’re talking no more than 10% of your total portfolio.
It's still a volatile investment so expect a bumpy ride. An ounce is worth £955 today - its 10 year high was £1,158 and its 10 year low was £423.
If you’re interested in holding it directly, The Royal Mint take investments from £20 online, keep it in their vaults and charge 0.5% a year (the service is called Signature). The transactional website won’t win any awards for design and feels a bit historical (!) but it works and you’ll enjoy the choices of title in the drop down menus, which are very on brand (including Brig, Duke, FltLt and HRH). Other options include gold funds – BlackRock’s Gold and General is popular and invests in companies which mine and work with gold, rather than the asset itself.
Have a great weekend