When I was in London in December, I had the opportunity to talk to an expert on rare and ancient coins. He showed me a rare Roman coin with the face of a long-dead emperor, still clearly imprinted in the metal. He also distributed coins from Vikings and others from different periods in Europe across the table between us.
After years of staring at computer screens watching stock prices rise or fall on the chart, it was an almost surreal moment to hold these coins in the palm of my hand to feel their weight.
There was no mistake in the world of fleeting paper profits, what I held in my hand was a real treasure.
And I’m not the only one who believes it’s time to get a little more physical with our wealth …
Gold in your pocket
Demand for physical gold is growing. The World Gold Council revealed that while total gold demand for the first quarter fell by 18% compared to the same period a year ago (where the first quarter of 2016 was the strongest first quarter for gold demand), gold demand and coins increased by a healthy 9% to 290 tons.
Moreover, Bloomberg recently announced that two companies have plans to open new vaults in Europe, capable of holding more than $ 112 million in gold.
BullionVault revealed that it has added three tons of gold in the last 12 months, raising its total reserves to nearly 38 tons.
The Bank of England – which holds gold for the UK Treasury, other central banks and private companies – has added 6% to its holdings since early 2016, with a total hold of 5,067 tonnes in February.
As you can see, more investors are adding physical gold to their portfolios – funds traded on a gold exchange (ETF) will simply not reduce it when you consider ETF-related fees.
And which would you prefer during a riot: paper gains or the weight of a gold coin in your hand?
Many investors around the world add physical gold to their assets for three major reasons:
- Rising inflation. We are beginning to see signs of inflation in the United States and throughout Europe. In the past, we have seen the price of gold rise in tandem with inflation, allowing investors to stay ahead of its bite.
- Negative interest rates. Although not a problem in the United States, part of the world is still struggling with negative interest rates. And instead of giving more of their wealth to banks, investors choose to invest their money in physical gold. (And given that US interest rates are still low, gold potentially offers a better return.)
- Geopolitical uncertainty. Questions about the health of the economy, the length of the bull market, the battles in Washington, the terrorist attacks, the election and others left investors on the brink, expecting the next event with a black swan to enter and lead to a market crash. In times of chaos and destruction, gold is the safety net you want to have in place. Shares fell and bonds imploded. Gold retains its value and even climbs.