Public trust in the UK government is at a seven-year low, according to the annual Edelman Trust Barometer, mostly provoked by economic pessimism. This growing scepticism is a key reason Ian Peacock upped his gold holdings from 10% to 50% of his investment portfolio. He’s not taking any chances.

Wakeup call

Ian started buying gold in 2020.

“I woke up!” he says. It started with questions and uncertainties about whether the UK government was telling the truth about the Covid-19 pandemic. “Once I saw the money being wasted by the government under false pretences, on things like the Covid App, PPE, PPE Contracts etc, I started to wonder whether the financial system was equally as murky, and maybe we weren’t being told the truth here either.”

“Once I started to research and understand the system, I realised that we are in a bubble that has to burst. The governments are broke and inflation was going to get very bad. I invested in gold as it is a hedge to inflation, I don’t expect to make a profit on it, but it will protect my wealth against inflation which is currently stealing a lot of my money.”

Consultative approach

The initial impetus for buying gold was how the government handled the Covid pandemic. Ian chose The Pure Gold Company because of its consultative approach which gave him the information he needed to make an informed decision about his gold investments. More recently Ian has continued to add to his gold portfolio because he has concerns about the billions of pounds being sent to Ukraine. He believes government spending is out of control.

“Either way it is a lose lose situation. We are in a bubble that has to burst or be continually propped up by the government. If the bubble bursts you lose your money. But if the government keeps propping up the markets by printing money, then inflation will make sure you lose your money as well.”

Josh Saul, CEO of The Pure Gold Company said: “There are an increasing number of clients who want to protect themselves from a financial system that they see as flawed. As the economic situation worsens, the sense of dissatisfaction with the government grows and they turn to physical gold to shield themselves from both the inflationary environment and the financial institutions that they no longer trust.”

Ian, an engineer in his 40s from Cambridgeshire, still owns some stocks and shares from before the pandemic but hasn’t bought any more since then. He keeps up with current events, monitoring prices and financial news every week. He is using his savings to make regular gold purchases.

“The world we live in now is only going to get worse in the short to medium term.  Fiat currency in all countries is getting less and less in terms of what it can buy you and conversely the value of gold will continue to rise.”

Today Ian’s gold holdings have grown to 50% of his portfolio, and he has sold some stocks from his SIPP (Self Invested Personal Pension) to invest in physical gold in the same vehicle. He’s making sure he has a safe haven when the bubble bursts.

The post Why Ian Peacock upped his gold holdings to 50% appeared first on The Pure Gold Company.

Stalled growth, stubborn inflation, high interest rates, failing banks, ratings downgrades, the red flags are flying and experienced investors are getting worried. Especially investors like Natalie Riesenberg who has seen, first hand, the fallout of a major economic crisis.

On Friday 12 September 2008, Lehman Brothers trader Natalie Riesenberg and her colleagues were placing bets on which bank would own them by the end of the weekend. No-one bet it would be a bankruptcy filing. What followed was a month of playing management-sanctioned video games while they waited to know their fate.

Today, Riesenberg is 15 years older and better prepared. She’s watching as banks falter or fail and she’s making sure she isn’t blindsided by another economic downturn. 

“I have rectified my mistakes and am investing in gold for long term security.”

In the front row of the Global Financial Crisis

“On the morning of 15 September 2008, I arrived at the office and was handed a piece of paper. It said: ‘Do not to speak to clients, do not to switch on your computer and do not to trade’.

Each department was to be sold off and it was clear that without its people, the departments were nothing, so we stayed there for over a month waiting to be bought. Eventually, after several days we were allowed to switch on our computers in order to play games – Tetris, Angry Birds and a selection of other ‘high-brow’ games.”

“I remember a Managing Director approaching my desk in excitement at a new game they hadn’t seen before. I forwarded it to them and soon after, you could see multi coloured balls bouncing across the multiple screens on their desk as they tried to explode colourful balloons. It was a very surreal sight, walking the trading floor every morning to see millions of bouncing balls on hundreds of screens played by dozens of educated, intelligent men and women waiting to find out their fate.”

Natalie had been at Lehman Brothers for a year before the crash, working as a sales trader for the Emerging Markets Credit Derivatives team.

“2008 really did feel like the end of the world. A more experienced trader who saw the crash of 1991 would perhaps have felt less concerned perhaps about the crash of 2008 or at least have been better prepared for it.” she says.

Back then, Natalie saw the value in investing in gold, but she was dipping in an out rather more quickly than the average long-term investor. She regrets not buying and holding gold back then.

“I often told my parents during that time that they should be investing in gold. It was one of the easier assets for a lay person to understand.” But she didn’t take her own advice until much later.

While gold as an asset class is simpler than many financial investments, it can still be daunting for the lay person to know when and what to buy. A consultative firm like The Pure Gold Company talks directly to its clients to ensure they understand their options and can make an informed choice. Natalie also turned to The Pure Gold Company when she decided to buy gold. For an experienced investor, Natalie wanted to be able to take advantage of trading opportunities when they came up, and their Buy Back Guarantee gave her this option.

A new perspective

So, what has changed? For Natalie a lot of it has to do with perspective. She has a family now. “I have my children’s financial security to think about and this gives me a new and different perspective to that of 2008 when I was carefree. As a sales trader there will always be a part of me that enjoys risk and playing the market, but I would always want to hedge myself with something more secure and for me, that is gold.”

“In this market and the looming years of economic downturn, to solely invest in risky assets would be foolish, especially if you have a family to think about. The global economic downturn is clearly a concern, which makes me even more inclined to either invest solely in less risky assets such as gold or bonds or at least heavily hedge myself with them.”

The sense of déjà vu is increasing. After three major bank failures in the earlier this year, the US banking sector came under further pressure in August following a downgrade by ratings agency Fitch. The June downgrade leaves the entire sector just one rating away from widespread negative actions, which could hit large and small banks around the country. Meanwhile in the UK, Metro bank is floundering, and next year the Bank of England said it will “take stock and update” its stress tests, looking at whether more banks should be added.

Echoing customer concerns

Josh Saul, CEO of The Pure Gold Company says: “Natalie’s concerns about the future of the economy are particularly worrying because she has experienced a major global market crash first hand. We focus on ensuring our clients make informed choices about buying gold, and have the opportunity to sell quickly when they find new opportunities.”  

Today, Natalie’s portfolio includes gold. She uses it to protect her wealth from market volatility and counterparty risk – the risk that the other party to your transaction or investment (banks, companies, governments) might fail. Physical gold reduces counterparty risk, which has become much more acute as the number of bank collapses has risen during 2023. It is a tangible asset that, well-stored in a segregated, allocated vault, provides a safe-haven from an uncertain future.

The post Natalie Riesenberg has good reason to fear another downturn appeared first on The Pure Gold Company.

As part of ITV’s £1 million Giveaway, Josh explained that gold is seen as a safe-haven investment with a long history of protecting against inflationary pressure and volatile markets.

The post A Million In Gold appeared first on The Pure Gold Company.

The war in the Middle East has investors rushing for safe haven assets, pushing up the gold price and spurring demand for the physical metal at The Pure Gold Company.

In the first week following the Hamas invasion enquiries surged by 400% as customers sought to protect their assets from the potential wider fallout in the region. CEO Josh Saul said: “Historically, gold has been the go-to safety net in tumultuous times. In the weeks just before and after the Russian invasion of Ukraine in February 2022, the gold price spiked by around 17%.

As the conflict has deepened, demand continues to grow. Two weeks in, the gold price had gained almost 9%, and demand for gold coins and bars at The Pure Gold Company had increased 260%, compared to the average weekly demand in 2023. Now, almost a month later, the gold price is still near all-time highs.

“The risk of contagion grows the longer the conflict continues, and if it spreads beyond Israel’s borders the geopolitical ramifications could be very severe. The oil price is already up in response to the conflict, and if its keeps rising, inflation could start to increase again. We were only just starting to recover from an inflation-induced recessionary environment, and this could seriously impact market volatility. 

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“Our customers are buying gold to protect their assets and act as a safety net because the safe-haven properties of gold come into their own during times of volatility. Markets were subdued for the first week, but as the invasion has escalated into war, the perceived risks have increased, and stock markets have started to lose ground. Rate rises have already dampened the property market, and further uncertainty can only add more pressure there. Gold has a long history of maintaining its value when other assets are falling.

“Some of our customers are specifically looking to remove their wealth from the banking system, because for them the global financial system becomes uncertain in times of war or terror. The added benefit of tax-free gold, depending on individual circumstances, creates a compelling case for buying physical gold. 

Up to date sales and enquiry figures, case studies and commentary are available from Josh Saul.  

The post MARKET COMMENT – NOV 6 – Investors rush to safe-haven gold as war rumbles on appeared first on The Pure Gold Company.

2022 was a turbulent year for global financial markets, with global stocks and bonds shedding more than $30tn in value amid rampant inflation, the war in Ukraine and continued disruption in the aftermath of the Covid-19 pandemic.

The investment landscape remains challenging. Interest rates are increasing, with a possible further announcement from the Bank of England scheduled for today. However, global inflationary pressures are likely to persist, meaning we’re unlikely to see inflation fall rapidly. In the UK we’re seeing rising uncertainty in property as an asset class, with house prices starting to fall. While cryptocurrencies may recover, the debacle over the collapse of the FTX crypto exchange has shaken confidence in this market too.

In this tumultuous environment, there doesn’t appear to be an obvious solution for investors. However, simply doing nothing is unappealing too – holding cash reserves will cost 10 per cent due to current levels of inflation.

So what options are available? One approach for savvy investors looking to protect their wealth is to wait out the market turmoil by investing in gold.

The market view

After more than a decade of quantitative easing and pandemic bailouts, it should have been easy to see the looming inflation crisis. Instead, the world entered 2022 thinking inflation was still ‘transitory’, until the Ukraine war and subsequent energy crisis pushed price rises to 40-year highs.

For years, equities have long benefited from this steady inflow of newly minted currencies, and the reality of this overvaluation is becoming clear, with markets under pressure through much of the last year. It’s impossible to predict the exact movements of the market, but investors try by using indicators that have been accurate about previous downturns, and one of the most popular is the Shiller CAPE P/E (price/earnings) ratio. This ratio is designed to represent how over or under-valued an entire market is rather than a single stock.

Based on past market movements, when US stocks on the S&P 500 have a ratio above 20 it is more likely the stock market is overvalued, and may be poised for a fall. The ratio for US stocks on the S&P 500 was almost 28 in January 2023 having already fallen from 37 in January 2022. This implies there is still further for these stocks to fall before their valuations rebalance.

UK stocks have proved more resilient than their Atlantic counterparts, but the US market is a sombre warning – the consequences of inflation, interest rate rises, government debt burdens and the cost-of-living crisis mean the downside risk outweighs any potential upside.

The US markets have the added pressure of a looming debt crisis, which could lead to the world’s largest economy defaulting on its debt obligations. While this is (hopefully) unlikely, what is essentially a political problem could quickly become an economic one, affecting markets the world over.

The equity markets are a very uncertain place currently but they won’t always be. Recoveries are as inevitable as the slump or crash that precedes them, it’s just a matter of waiting out the storm until the upturn, but where to wait?

Alternative options

Usually low-risk UK government bonds took a hammering when former prime minister Liz Truss’s government announced their largely unfunded mini-budget spending spree, undermining their low-risk reputation. The bond market may have stabilised, but it’s clear unexpected events can be as brutal on bonds as on other seemingly riskier assets. They’re also not providing returns above inflation, which means investments are still being eroded often while locked up in long-term bonds.

Meanwhile property is finally on the downturn in the UK, with NatWest predicting that value could fall by around seven percent this year. This follows in the shadow of a US property market that has been falling for many months already. House prices were propped up by pent up demand and stamp duty holidays during the pandemic, but the cost-of-living crisis, a recession and repeated interest rate rises have converged to squeeze households just as mortgage prices are surging.

Meanwhile cryptocurrencies, seen at the start of the pandemic as a digital safe-haven, are experiencing a dramatic ‘crypto winter’ with collapsing currencies, collapsing platforms and plunging values. The sector lacks clear regulatory scrutiny and recent volatility makes it an even more risky option in the current economic climate.

Opportunity knocks

While the global economy resets to more realistic levels of debt, inflation and interest rates, there are hard times ahead. Markets are not at their bottom, yet. When they do turn though there will be opportunities in all asset classes (possibly even including crypto), the trick is being able to wait outside the volatility until these buying opportunities arise.

However, waiting passively isn’t a smart option. Inflation means any cash in the bank is losing value as goods get more expensive. The current astronomical levels of inflation (The Consumer Price Index Including Owner Occupier’s Housing Costs in December 2022 was 9.2% ), means cash is guaranteed to lose you money, because savings interest is still way too low to make up for the erosion of inflation.

The alternative is actively waiting. Investors can do this by investing in an asset that is not guaranteed to lose value, may gain it, has no counterparty risk and is almost as liquid as cash. Physical gold is all these things. While the price is not guaranteed to rise, the history of gold has proved its worth as a safe-haven asset which tends to rise when other assets are falling. Because it is a physical commodity, its value also tends to rise alongside other goods as their costs rise. This natural inflation hedge doesn’t mean that gold will directly track the rising costs of other goods, but it does have a better chance than cash of retaining its buying power.

The liquidity of cash makes it easy to quickly respond to opportunities across asset classes, but gold can also be very quickly liquidated when investors need to move fast. While the world is righting itself, gold is a holding pattern that preserves wealth, allowing investors to bide their time and wait out the periods when rewards are insufficient, returning to the market when valuations are compelling again. It also comes with tax advantages. Investment-grade gold is VAT free and can be capital gains tax free as well if you buy Royal Mint minted coins that are legal tender.

Owning gold as part of a diversified portfolio provides some protection against the sort of ‘black swan’ events that are unexpected, destructive and only obvious in hindsight. Gold can be the ‘dry powder’ that’s ready to deploy when the overall risk/reward environment is more compelling, and many savvy investors are concluding that 2023 is the time to own it.

The post Actively Waiting – The Savvy Approach to Investment in 2023? appeared first on The Pure Gold Company.

Investors are continuing to pump small amounts into gold investments as the precious metal continues with its rally which began in November 2022, reaching $1,878.85 on 9 January, its highest price since May 2022.

The Royal Mint said its own sales of small gold bars (under 1 troy ounce) surged 46% month-on-month. Plus, UK investors have also benefited with gold prices in sterling up 8.9% since 31 October from November to December 2022. 

At MoneyWeek we’ve always said it’s a good idea to invest in gold. As well as diversifying your portfolio, gold makes for a good inflation hedge. What’s more, in times of geopolitical uncertainty gold tends to retain its value.  

Commenting on gold prices in the first week of 2023, The Royal Mint director of precious metals investment, Andrew Dickey, said: “Gold investors have significantly benefitted from a weakening dollar which is pushing gold prices higher as the Fed slows interest rate hikes. The continuing momentum into the first week of trading in 2023 will fill precious metals investors with optimism for the year ahead, particularly those seeking to hedge and diversify their investment portfolios in the wake of warnings from the IMF [International Monetary Fund] that a third of the world’s economies would be in recession this year. Historically, a mild recession has been positive for gold prices but the jury is out on whether this will be the case in 2023 and if gold will live up to its ‘safe haven’ status.”

The Royal Mint said there has been a significant increase in smaller scale gold investors who are dipping their toes into precious metals markets by investing in the yellow metal. 

“1g and 5g gold bars proved particularly popular in the lead up to Christmas with those lucky enough to receive a gift of gold benefitting from an early 2023 jump in the value of their holdings,” Dickey added.

Gold is up 2.4% this year so far and would need to rise just another 10% to hit the all-time high of $2,067.15 recorded by the London Bullion Market Association on 6 August 2020, according to The Royal Mint.

“In early 2023 trading, gold market professionals will be keeping a close eye on upcoming GDP and inflation data across developed markets as well as other prominent economic indicators. Central bank signals about future policy in the weeks ahead also have the potential to further impact how the precious metal will perform during the first few months of the year.”

Last month, gold broker The Pure Gold Company reported a 419% increase in demand for gold bars and coins over the last four weeks alone as ongoing market volatility pushes investors towards gold. 

It’s not just first-time investors who have turned to gold either. Central banks bought more gold in 2022 than in any other year since 1967 as they seek to protect themselves from global headwinds.  

“Increasingly, people are looking at gold as an attractive investment option at a time when other options look risky,” says Josh Saul, CEO of The Pure Gold Company.” 

Investors are ditching property for gold 

With rising interest rates and falling house prices, investors are also looking to gold instead of property. 

“We’re seeing people looking to reduce their exposure to European real estate, which is being affected by rising interest rates, increasing mortgage costs and significant cost of living pressures as inflation remains high,” says Saul.  

“In fact, a number of our clients are now looking to sell property and protect the proceeds in physical gold, where prospects for a stable and reliable return remain good.” 

How to invest in gold?  

There are many ways to invest in gold – from buying gold bullion to shares in gold miners and gold ETFs. Take a look at our article on how to invest in gold for more information on how to get started if you are looking to add gold to your portfolio. 

MoneyWeek has always recommended investors hold gold – anywhere between 5% to 10% of their portfolio, due to its status as a “safe haven” investment.  

“Many people are looking for a safe haven to help weather the storm and, in many respects, this is what gold offers,” says Saul. “Gold has always been seen as a defensive asset, which offers protection in times of uncertainty and escalating inflation.  

“Being invested in physical gold can offer something of an insurance policy, providing peace of mind at a time when markets for other assets are volatile or deteriorating.” 

Geopolitical tensions don’t look likely to abate any time soon, which should continue to push the value of gold further as investors turn to it as a way to preserve their wealth.

The post Investors turn to gold as rally in the precious metal continues appeared first on The Pure Gold Company.

Today we turn our attention to the physical gold markets and ask if now is a good time to buy physical gold.

There is, as veteran dealer Ross Norman of Metals Daily puts it, a “disconnect between the gold price and what is happening in the physical markets.” 

“Our biggest challenge,” says Joshua Saul of the Pure Gold Company, “is finding enough stock on a daily basis to sell. There is a long line of demand, but very little supply. There’s more demand than at the height of Covid.” 

These situations don’t occur very often, but they do occur.  

The gold price is falling, but demand for physical gold is high 

I remember 2008 like it was yesterday. Gold cratered along with everything else in the second half of that year. It lost around 30% – falling from close to $1,000/oz to $720. The mining companies fell by a lot more. 

Yet there was a scramble in the physical gold markets. Bullion dealers had never been so busy. The general public were rushing to get their money “outside the system” into an asset that was nobody else’s liability.  

Gold would later turn up long before most other assets. November was the low, while the S&P500 carried on lower until the following March. But the fact was there was a scramble to buy physical gold even as the price was falling. 

It happens. “Coins and bars,” says Norman, “are just a subset of a much bigger industry.” That industry includes the futures markets, exchange traded funds, institutional buying and selling, central bank buying and selling and, of course, jewellery.  

Ordinary investors may look at the state of the world and think, “I need to buy some gold”. They may be doing that at unprecedented levels. But that is not enough to balance out institutional investors who are, says Norman, “selling three to ten tonnes a day.” 

As I say, these disconnects do happen, but they don’t necessarily last. 

The US dollar has stolen the show 

It’s all about the US dollar, as we have been saying on these pages for many months. In the year to date, gold is up around 13% in sterling. That’s an almost stellar return compared to stock and bond markets. But against the dollar it’s down some 8%.  

How long does the dollar stay so strong? That’s the question we must ask ourselves. On current form, a while longer it would seem. 

Norman, who has an extraordinarily good forecasting record, agrees. “The rampant dollar looks like it might be here for a while,” he says. 

You don’t need to look further than US interest rates relative to European interest rates and US energy dependency relative to Europe’s, to understand why we are where we are. 

“Never in my career did I think we’d see the circumstances we are now in and gold behaving like it is. It’s extraordinary. The dollar has stolen the show. But nuclear war is a real possibility!” 

Gold, by the way, will survive a nuclear explosion, and none of the three types of radiation that follow – alpha, beta and gamma – will affect it. 

Investors are still buying gold bullion 

But one of the few bright spots in this market is what Norman calls “the literate investor” who continues to support it. 

Saul of Pure Gold makes a similar observation. His company makes a point of talking to clients as they buy and sell, to understand their motivations. As a result, they build up a lot of qualitative data. 

“Everyone’s looking to protect their wealth in a time when things are really uncertain”.  

But there have been two notable trends he has observed. 

First, there has been a notable increase in buyers from the financial world.  

“Traders, investment bankers, financial services, accountants, lawyers – they’ve been buying large sums.  

I find this notable: “Their trade sizes are bigger. The median trade size is probably three times bigger than it was a year ago – and during Covid.” 

Saul says many of them are worried about what is going on behind the scenes at the banks. “These are considered investments, where there is a lack of alternatives.” 

Money is moving from property to gold 

The second notable trend is the exodus of money from real estate – whether commercial or residential. 

“Property investors normally like to remain liquid, so they have cash on hand ready for the next deal. Buy-to-let landlords, commercial landlords, people who buy big buildings and let out floor by floor, developers. Companies and individuals. A lot of them have a lot of cash. They have an appetite for debt. But the increased cost of debt, plus the possibility that the underlying asset will fall in value means there is too much risk for them. They’re now parking that cash in physical gold.” 

“We are also seeing a growing amount of people with properties on the market, who when their property sells will move their capital into gold. Many are removing their exposure to debt that they might have taken two or three years ago.” 

What we are seeing then is capital flowing from finance and from real estate into gold. I find that telling.  

China is driving demand for gold bullion 

There’s a shortage of physical metal. Premiums are higher than normal. But that is not deterring buyers. Guess where premiums are highest?  

China. That’s where the demand for physical gold is highest. 

“As much as $50 over spot in some places,” says Norman. “Normally arbitrage irons this out, but that’s not happening.” 

The trend of gold making its way from East to West continues. 

Here in the West, on the ground, there is a scramble for physical gold that you would not know to look at the gold price. It won’t last. It never does. 

The technicals for gold do not look great at all; it’s in a downtrend. That cup-and-handle formation that had us so excited earlier in the year looks like it has been invalidated. As in 2008, gold looks like it might need to go lower before it goes higher.  

But at grass roots level there is a lot of smart money buying physical gold.  

Who has got this wrong?

The post Is it a good time to buy physical Gold appeared first on The Pure Gold Company.

For high-net-worth (HNW) individuals with investable assets of £1 million or more, precious metals are regarded as useful hedges against inflation, and gold held in some forms has tax advantages. But each metal can present its own set of opportunities and risks.

The best precious metal advisers can help to guide a client through the unique nuances of investing in the asset class. They are also able to identify emerging market trends that can protect clients against unexpected volatility.

This year, Spear’s is delighted to welcome Josh Saul of gold and silver dealer the Pure Gold Company, a frequent guest on radio and television and one of the gold industry’s best connected and well-informed figures.

Spear’s publishes annual rankings of the top private client advisers and service providers to HNWs. These are drawn up on the basis of peer nominations, client feedback, telephone and face-to-face interviews, data supplied by firms, as well as information gathered by the Spear’s editorial and research teams.

The precious metal advisers featured are included in the table below, along with their Spear’s ranking and focus. 

The post The best precious metals advisors for high net worth individuals 2022 appeared first on The Pure Gold Company.

Gold and gold miners are back in a downtrend. Occasionally, there are glimmers of hope, only for the sellers to come piling back in. The slide began shortly after the commodities spike in the spring following Vladimir Putin’s invasion of Ukraine, and it has been relentless. Your author shakes his head. Isn’t gold supposed to go up during times of war? Isn’t it the go-to asset in times of inflation? Apparently not.

However, if one views gold as simply another currency, then its performance has not been as bad as the headline numbers suggest. It has not done as well as the dollar, but it has outstripped the pound and the euro. Even though gold is quoted in US dollars, the dollar price of gold is irrelevant to us British investors. If you pay pounds to buy gold, and you will eventually sell for pounds, all that matters is the sterling price of gold.

The chart below shows gold in pounds over the past ten years. Gold cost £700-£800 an ounce (oz) in 2014 and 2015, and is now just shy of £1,475/oz. It is not far off its highs around £1,575/oz and remains in a clear long-term uptrend. In other words, gold has done its job and hedged investors against the mess that has been sterling these last five years.

Gold price in pounds

The ideal backdrop for gold

But, really, you want to see gold rising against all currencies. Panicking capital has been fleeing to the US dollar, which has been occupying the safe space that might normally belong to gold.

The US is tightening monetary policy faster than the UK, Japan or Europe and the prospect of higher yields on US assets has made the dollar more attractive. The US is ahead in the rate-rising cycle and until Japan, the UK and Europe start tightening as aggressively, the dollar is going to remain strong.

The ideal macroeconomic environment for gold is for equities to be weak and for government bond yields to be lower than expected inflation. At present we have the former, but not the latter. Longer-term inflation expectations are still below 3%. If they were at 8% or 10%, but rates were 5%, then capital would seek out the alternative that is gold. That is when so-called real (inflation-adjusted) interest rates are negative.

You want to be at a point where central banks are reluctant to raise rates and yet inflation won’t go away – in the US, at least, we do not have that. Yet. How permanent is this inflationary episode? How much will central banks raise rates? These are all questions we must answer if we are to make the decision to buy gold. Inflation might come down a little as weaker oil and metals prices filter through, but I think we’ll remember pre-Covid inflation numbers as halcyon.

Another issue to ponder is whether gold is an analogue asset struggling to adapt to a digital age. Gold is perhaps the oldest substance on earth. It was present in the dust which formed the solar system four-and-a-half billion years ago and its origins are thought to lie in supernovae and the collision of neutron stars. It came to earth via the asteroids that then bombarded the planet.

While highly malleable, it is also the most permanent substance, thought to be indestructible. All the gold that came to earth all those billions of years ago is still intact. You can batter it into a film just one atom thick but you cannot destroy gold. As a result, all the gold that has ever been mined, save that which has been dissolved in aqua regia, is thought to still exist, even if lost.

That’s why gold has been such good money. It lasts. Value today, however, is almost entirely digital. Money itself is digital: just 2%-3% of Western money exists as cash. The bond market is mostly digital. Software, intellectual property (IP), cryptocurrency – digital is where the value is. It’s also where most of Western growth has been these past 30 years.

Russia and China could develop a new global currency

Rapid recent geopolitical developments, however, suggest that gold is far from irrelevant. A new gold-backed currency could emerge. With Putin’s invasion of Ukraine, I was quite amazed by the speed at which the US weaponised the dollar and the banking system. Some $300bn in Russian central bank assets were confiscated (about one fifth of Russian annual GDP) and Russia was frozen out of SWIFT, the international payments system. Putin retaliated by demanding roubles for Russian gas. The currency wars well and truly began.

If Russia is not to be isolated internationally, it needs an international currency it can trade with. Just last month Putin said, “The issue of creating an international reserve currency based on a basket of currencies of our countries is being worked out.”

Sergey Glazyev, a former Kremlin adviser, now minister in charge of integration and macroeconomics of the Eurasia Economic Union (EAEU), is, it seems, supervising a new money system for the EAEU and China. “The world’s new monetary system, underpinned by a digital currency, will be backed by a basket of new foreign currencies and natural resources”.

“All interested countries will be able to join. The weight of each currency in the basket could be proportional to the GDP of each country, its share in international trade, as well as population and territory size. In addition, the basket could contain an index of prices of main exchange-traded commodities: gold and other precious metals, key industrial metals, hydrocarbons, grains, sugar, as well as water and other natural resources.”

Western nations may have shunned the “Russian Davos” in June – the St Petersburg International Economic Forum – but key representatives from China, India, Iran, Turkey and many Arab nations were there. The recurring theme was trade between non-Western powers in a US dollar-controlled world of sanctions and a new, non-Western international currency.

Meanwhile we have the The Shanghai Cooperation Organisation (SCO), which had its latest summit last week in Samarkand, Uzbekistan. In terms of geographical scope and population, it is the world’s largest regional organisation, covering 40% of the world population and over 30% of global GDP. Its members are China, Russia, India, Pakistan, Iran (which just joined), Kyrgyzstan, Tajikistan, Kazakhstan and Uzbekistan. And Turkey’s president Recep Tayyip Erdogan says he is considering membership. These are not exactly pro-Western nations.

Both Putin and Xi Jinping of China called for a reshaping of the international system. Various infrastructure projects being developed, notably a trans-Afghan railway to link Uzbekistan to Pakistan, a China-Central Asia natural gas pipeline and a China-Kazakhstan-Uzbekistan railway. China, which, as we know, is beholden to both Europe and the US for its exports, clearly wants to open up new markets.

Are these nations seriously going to want to trade in dollars? You can bet your bottom dollar that many of China and Eurasia’s brightest minds are plotting an alternative system. But it’s a lot easier said than done.

The problem of trust

To back a currency with commodities would raise all sorts of problems relating to storing raw materials. And if you use futures, you need to trust your trading partner. It is the same with systems based around government debt, GDP and fiat currencies, too.

The record of the regimes involved is hardly unblemished. The body language between the various leaders, especially China and Russia, does not suggest total trust. How then to make a money system that is practical and that everyone can trust?

The answer is an obvious shiny yellow material, analogue asset in a digital world or not. It is often bandied about that among China’s many ambitions is for the yuan to be the global reserve currency. But every international reserve currency in history started out backed by gold. Whether it was the pound, the dollar, the florin or the currencies of the ancient world, they were all at least as good as gold, if not gold itself.

They may have ended up debased into oblivion, but they started off backed by gold and sometimes some silver, too. It was only because the money was sound that it won global trust in the first place. Even John Maynard Keynes (who in 1924 declared the gold standard a barbarous relic) in 1942 proposed a supranational currency backed by gold: the bancor. Would such a system be practical today? I think so.

Who owns the gold makes the rules

We know that many countries in the SCO have plenty of gold and have been increasing their holdings. In the 14 years between 2006 and 2020, Russia’s central bank more than quintupled the country’s gold holdings, from around 400 tonnes to today’s 2,300 tonnes or so. It’s now world’s fifth-largest gold owner.

Then there is China. It has been quietly de-dollarising. Since 2021 China has lowered its holdings of both dollars and US Treasuries by 10%. Its holdings in US Treasuries have dropped by over $100bn since 2021, and it now has less than $1trn in US debt for the first time since 2010.

Its US dollar foreign-exchange reserves have come down from $3.25trn to $3trn over the same period. Having seen what happened to Russia, China will not want to be too vulnerable to a banking system that is run by the West.

Then there are China’s gold holdings. I consider this the most important story in world finance, yet it is largely ignored. China has far more gold than it says. China’s stated reserves are 1,948 tonnes of gold (barely 3% of its foreign exchange reserves). America’s are 8,100 tonnes (over 65% of national reserves).

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It revealed that almost a quarter of clients buying gold for the first time in the past week work in the hospitality sector, heavily weighed down by surging energy bills off the back of the Ukraine war.

Josh Saul, CEO of the gold investment firm, said: “Some of our clients say they are considering shutting restaurants to avoid the energy price surge which would cause excessive financial losses. Others have decided to open only three days a week.

“Many of these clients have said they are trying to protect and preserve their personal wealth and see gold as an asset class with a proven track record as an inflation hedge especially during times of uncertainty and geopolitical concern.”

Saul also revealed that since August, one in 10 customer enquiries came from people considering selling their homes in the short-term.

“They’re worried they won’t be able to afford their mortgage payments because of interest rates hikes used to dampen inflation,” he said.

‘Growing sense of foreboding’

Saul added: “There is a growing sense of foreboding. Increasing mortgage payments and escalating energy bills are set against a backdrop of the highest inflation in over 40 years. Meanwhile geopolitical risk and the reality of a global recession are adding to the uncertainty. It’s prompting people to take refuge in an asset class that inflates with inflation and can be a safe-haven asset amid the turmoil.”

Elsewhere, The Pure Gold Company said it has seen a 129% increase in customers removing exposure to equities within their SIPP/pension in order to buy physical gold within the same vehicle.

Saul explained: “Clients are concerned that losses in their retirement accounts will result in them working beyond retirement age. As a safe haven asset, physical gold can act as a hedge against declining equities, so can protect some of their retirement savings against a stock market slump.”

The price of gold has increased over 450% over the last five years in sterling terms, but the firm said customers aren’t just buying it purely for growth.

“The priority is wealth preservation in an asset class that has the best chance of outperforming inflation. Most of our UK based clients take advantage of UK gold coins which means that any gains are tax-free depending on individual circumstances.,” Saul added.

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