It's times like these

Global Markets Commodities Oil and Gold
#1

Hi all,

It is times like these that I remember the reason we started “investing” in gold back in 1988. Over the years (many years) I have occasionally questioned the wisdom of investing in gold. After all, it has hardly been a spectacular investment over the 33 years we have had it.

But the reason we invested in gold was not to make a currency profit. It was with the memory of the oil price crash a few years earlier that had caused 70% unemployment in Aberdeen, my previous assigned location. So we started buying gold on a weekly basis at about $400 an ounce. The then Chancellor, in his infinite wisdom, decided after Big Bang in the markets that Britain didn’t need gold any more, and so started the decade drift in prices to about $250 an ounce.

Below is a link to an article by one of my favourite commentators on inflation - Mike Maloney. If you don’t have time to watch it all, skip to 14 minutes in where he explains how the Russian Rouble has suffered five quadrillion times inflation since the 1800s, and is now going through the seventh major loss of value.

Considering the current uncertainty in the markets, it is worth thinking long term right now, and setting some ranges for contribution to your portfolio. And you don’t need to have millions to think like this.

We set a “reasonable range” 30 years ago for gold to be between 5% and 15% of our portfolio. We have never had to use it as contingency, and always been able to do what we need to do by other means (eg overdraft, loans), and that can be a very safe feeling when your electricity cost just doubles overnight.

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#2

Are you still within that 5-15% range or are you planning to add more to it? Also how do you own gold, like actual physical gold or through ETFs etc?

#3

Hi ,
We aim for a 10% allocation. We were quite a bit over that, and it was the fastest way to fund our crypto hobby 21 months ago. We maintain a bullionvault account in London. I find this by far the easiest and lowest cost to store gold and silver. It is definitely not an ETF. They are not worth the paper they are written on. They hold one ounce of silver for every 100 ounces they trade. Read the fine print - they will pay you in USD if they default (at the manipulated price). Bullionvault does a daily reconciliation and can track your holding to a share of a numbered 400 oz bar. They are 15% owned by the World Gold Council. You can trade gold and silver 24x7. Assets around £2bn all unencumbered private investor physical gold.

#4

Checked out their site. Pretty cool. The FAQ section is also pretty helpful. How long have you been with them? Good find. I like that there’s no min either. (I checked Reddit for feedback also and people seem to really like them)

#5

More than 10 years

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#6

Hi @Mondeoman . Yup - I’m a great believer in gold. As you point out - it might not bring you a huge profit, but it’s the ultimate store of wealth (other than a house, I guess…) In 3500 BC it was recorded that an ounce of gold could be you a good quality toga, a belt and a good pay of sandles. Then, I think it was Shakespeare who said that an ounce of gold would buy a man a fine tailored suit. Now in 2022, an ounce of gold will still buy you a decent suit and a pair of nice shoes. As you point out - compare that to what 1 rouble will buy you now!!!

#7

Hi @Blue2
Recent months have caused me to re-evaluate our plans. I must have been asleep not to have noticed that almost everywhere EXCEPT where we own the majority of our properties, prices have been a bit “1991-esque”. Or 1979 to 1983. I have an Australian colleague who is investing in UK property and has asked me four months ago to “mentor” him. I had agreed. I never thought I would find a deal that would involve both of us, but I am in the middle of evaluating a sale of a property that we bought originally in 2002 and that now has a market value four times our purchase price.

This is exactly performing to our long cycle estimates. Prices double every 10 years, or quadruple every 20 years. That is certainly not the case in the North East, but it could be ready for a repeat of 2002 to 2006 all over again (doubling or tripling of price), and if it does in the next 3 years, that will come close to the North West. Doubling every 10 years means that the annual rate of increase is 7% per year. Plus or minus 1%, that is consistent with OUR rate of inflation. I say OUR rate because everyone has a different rate of inflation and that depends on what they spend their money on. I stopped smoking 5 years ago, and my wife is in the middle of quitting too. The combined effect of those changes will be that our overall annual spend will drop by about 10%, and those things we do spend money on do not increase in price as much as smoking, drinking or petrol. We are replacing smoking poverty with fuel poverty. LOL.

I am about to instruct a back to back lease/purchase option deal with myself at the front end of that deal, the investor in the middle, and our tenant of four years at the back end. I wish to separate roles and responsibilities and shift risk onto the investor. He is fully aware of that, and is highly likely to join me on this journey. It is a decade since I did a lease/purchase, and we need to accelerate our disposals from one per year to four per year to achieve our overall property goals. Exciting times, for the first time in a decade :grin:

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