Help to invest in gold?

Brown_Bear

short_butt_sweet wrote: »

you can think of it as insurance. but it's a bit rubbish as insurance.

take a classic case of insuring against an unlikely event: buildings insurance for your house. your house is unlikely to (for instance) burn down. buildings insurance is cheap. the worst-case events are very unlikely, but could happen. and if they do, buildings insurance pays out a very large amount, putting you back in the position you were in before the bad event.

compare that to holding gold. if you hold a lot of gold, it isn't cheap, because you're giving up likely higher returns (from investing in shares, bonds, etc). however, if you restrict your gold to a small percentage of the available assets that you might invest (e.g. 1% of them), then the cost of holding gold is cheap.

now imagine that some bad event happens. does holding gold put you back in the position you'd been in before? almost certainly not. does gold go up in value after a bad event? perhaps, but it depends on the event. does holding gold actually help you at all with handling the event? perhaps, but it depends on the event.

that sounds like really rubbish insurance to me. a bit like if buildings insurance didn't cover you if your house burnt down on the wrong day of the week, or if they just didn't feel like paying out

It's a different type of 'insurance'. Maybe 'reserve asset' is a better term.

Home insurance is a contract - reliant on the ability to enforce by a legal system. Without enforcement ability it's just a piece of paper.

Gold is a bearer asset, not dependent on a counter-party or a legal contract.

Brown_Bear

Apodemus wrote: »

I have my great grandfather’s writing case, and in amongst all his letters and papers is a wee bag with his gold sovereigns. They date to around 1907 and are well-worn, from the days before WW1 when they were simply in use as pound coins. They are not collector grade, just old coins. I don’t see me ever cashing them in (neither my father or grandfather did, so why should I?) they are just curios in a time-capsule!

Incidentally, accounting for inflation, the gold in these coins is worth about twice what it would have been worth in 1907, so I guess they have been a store of value, but probably a poor investment in comparison to the stock market. However, 1907 was the year of the first global stock market crash and I wonder if great grandfather put these away as a hedge against uncertainty in troubling times!

Well he would have been right - considering that WW1 was only 4 years away.
UK govt confiscated other securities (eg shares) and falsified gilt buying records during that time.
Those sovereigns could have been the only way to escape conscription to the trenches.

Brown_Bear

Malthusian wrote: »

Gold is more vulnerable to confiscation than stocks & shares.

Stocks & shares can be held with a multinational company that would have no reason to hand over your assets on the orders of a UK dictatorship. .

I think many govts do co-operate with asset searching and freezes etc. And you can't predict what their attitude will be in the future.
In the 1940s all UK citizens had their foreign shares forcibly converted to UK govt gilts or GBP cash.
There would also be the chance of a paper trail leading to these overseas assets. Plus you don't know for certain whether the foreign company will act as a reliable counter-party.

Malthusian

Brown_Bear wrote: »

I think many govts do co-operate with asset searching and freezes etc.

No civilised democracy will order a multinational fund platform to hand over assets personally owned by a refugee to the dictatorship from which they have fled.

I can predict they are less likely to do so than the Stasi are to dig up your floorboards.

In the 1940s all UK citizens had their foreign shares forcibly converted to UK govt gilts or GBP cash.

Source? Genuine question.

Brown_Bear

Malthusian wrote: »

Gold is more vulnerable to confiscation than stocks & shares.

If you have physical gold under the floorboards by contrast the secret police can simply rip up the floorboards and take it away.

The Stasi will deduct fingernails until you hand it over either way.

.

This is true - but it would rely on the govt knowing (or at least suspecting) you have bought the gold.
Physical gold (like cash) has the advantage that it is a bearer asset. So you would only need to tell someone else (eg a relative) where it was, for them to access it. There is no need for official records of ownership transaction etc.

All sounds quite far fetched to us in the UK.
But in many parts of the world it is a real issue.

Brown_Bear

Malthusian wrote: »

No

Source? Genuine question.

BoE archive records - refer to Brits who left as 'Quitters' !

Brown_Bear

Malthusian wrote: »

No

Source? Genuine question.

Also Baille Gifford website page for Scottish Mortgage IT. Called 'UK Repatriation 1940'. In the history of the trust section. Sorry - can't post link.

WW1 gilt issue forgery is on the official BoE website. 2017 archive finding.

Brown_Bear

Malthusian wrote: »

No

Source? Genuine question.

BoE archives. M7/537. p1044

Brown_Bear

Better source is BoE archives.

(M5/534)

BoE 1939-45 part II appx II. p354-355


You can find on BoE archive website by putting ''quitters'' into their search function.