Gold has seen a gain of 9% in euro terms so far in 2017 after rising from just below €1,100 per ounce at the start of 2017 to just below €1,200 per ounce in recent days.

It has risen in all currencies in 2017 including the U.S. dollar in which it is up 7%.

This comes on the back of gains in 2016 when gold rose 13% in euro terms, 9% in dollar terms and over 31% in sterling terms after the pound devalued sharply after the Brexit shock.

These gains in 2016 and 2017 come in the aftermath of a sharp price fall in 2013 and 2015 when gold fell as economies recovered and risk assets such as bonds and stocks rose sharply.

Over a 5 year time period, gold has performed quite poorly as most stock, bond and property markets saw strong gains. However, it is important when considering investment and pension performance to focus on the long term. Over the long term, of 10, 15 and 20 years, gold has performed very strongly. In the last 15 years, gold has returned 9.9% per annum in euro terms (see table).

Gold saw record investment demand in 2016 as risk averse money again diversified by buying gold due to increasing volatility in markets. This demand is continuing in 2017 and gold is again acting as a hedge and a safe haven from the risks posed by the Trump Presidency, Hard Brexit, Eurozone elections and other risks.

The investment and savings landscape in Ireland has arguably never been more uncertain – as is the outlook for stocks, property and government guaranteed savings vehicles.

Gold’s medium and long term fundamentals remain bullish due to what we term ‘MSGM’ - which stands for macroeconomic, systemic, geopolitical and monetary risks:

  • Macroeconomic risk is high as there is a risk of recessions in major industrial nations - from the debt laden Eurozone, Japan, China, the U.S. and more recently UK after Brexit.
  • Systemic risk remains high as little of the problems in the banking and financial system have been addresses. There is a real risk of another 'Lehman Brothers' moment or a new 'Grexit' moment and seizing up of the global financial system.
  • Geopolitical risk remains elevated. 'Brexit' has created a whole new set of risks to Ireland, the UK and the Eurozone itself. The Middle East remains a powder keg and tensions with Russia remain high. Trump's Presidency means that there is a real risk of conflict with Iran and the consequent effect on oil prices.
  • Monetary risk is high as the policy response of the Federal Reserve, the ECB, the Bank of England, the BOJ and the majority of central banks to the risks mentioned above continues to be ultra-loose monetary policies, negative interest policies (NIRP). The printing of currency on a global scale creates the risk of inflation.

Volatility and turbulence is almost certain in the coming months and now deposit “bail-ins” are quite possible. Irish banks are vulnerable as seen in the recent stress tests. In the EU, deposit bail-ins are “now the rule” as warned of by Minister Noonan himself in 2013.

Deposit bail-in risks are slowly being realised in Ireland, after it emerged that FBD, one of Ireland’s largest insurance companies, have been moving cash out of Irish banks. FBD moved over €150 million out of the Irish banking system and into corporate and sovereign bonds over the past year.

The move was prompted by low returns offered by bank deposits and the risks that deposit bail-in rules could see deposits confiscated. FBD were one of the first and strongest intermediary partners of GoldCore in recent years and were strong advocates of an allocation to gold in diversified investment and pension portfolios.

Gold bars on display in GoldCore offices in London on March 11, 2010 (Bloomberg)

Interestingly, Minister Noonan himself diversified into gold in March 2015. The smart money is diversifying into gold as seen in gold buying by Lord Rothchild and billionaire investors such as Rogers, Faber, Singer, Dalio, Bass, Einhorn, Odey, Druckenmiller, Paulson and Gross. There is also buying from institutions such as the world’s largest insurer Munich Re, the world’s largest asset manager Blackrock Inc. and the increasingly powerful People’s Bank of China.

In an era of negative interest rates and bail-in risks, diversification has never been more important. Owning physical gold in the safest vaults in the world will again protect and grow wealth in the coming years.

How to Invest in Gold

GoldCore Secure Storage
Directly own gold coins or bars as an investment or in your pension in segregated and allocated insured storage in some of the safest private vaults in the world including Loomis Zurich and Brinks Singapore. Premiums on gold bars range from 1% to 3.75% and annual insured storage is 0.49% to 1% per annum depending on the size of the investment.

Perth Mint Certificate Programme
Perth Mint Certificate Programme (PMCP) is operated by the Perth Mint of Western Australia which is wholly-owned and guaranteed by the Government of Western Australia and established in 1899. The PMCP allows Irish investors, savers and pension funds to own investment grade gold, silver and platinum bullion. Fees on buying certificates range from 2% to 3.9% depending on the amount bought. Unallocated gold certificates have no storage fee and allocated gold certificates cost 1% per annum. The selling fee is 1.5%

GoldSaver
GoldSaver is a regular savings account, but instead of saving in euro, one saves in physical gold. GoldSaver account holders buy gold online on a monthly basis with a minimum monthly purchase from as little as €100, paid conveniently by direct debit. Account holders can also make additional lump sum deposits at any time. GoldSaver has a 5% premium to buy and a 1% annual administration charge.

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