We provide direct access to international bullion vault operators. We design and implement structures whereby clients can hold physical gold in a secure, transparent and cost effective manner.
Gold is often viewed as a safe heaven for times of extreme market conditions or as a hedge during periods of high inflation. Portfolio allocation often treats gold as an investment asset alongside equities, bonds and commodities but this, in our view, is not the best way to approach gold.
Gold does not generate an investment return, but it can be lent out or used as collateral for borrowing. It can thereby generate a yield in a similar way to a national currency (eg USD or GBP) when deposited at a bank. Gold is also highly liquid (T+2) and preserves purchasing power over long time periods.
We believe that gold should be a long term component of the portfolio allocation to liquidity.
Gold preserves purchasing power over long time periods
The chart shows that all major currencies have depreciated against gold since 1900. One of the reasons for this is that the global stock of gold has grown by less than 2% p.a in recent decades in contrast to the supply of national currencies, particularly those subject to Quantitative Easing programmes. Gold therefore provides an excellent hedge against long term inflation.
Value relative to gold
* As of 31 December 2019. Based on the annual average price of a currency relative to the gold price.
** The ‘Mark’ was the currency of the late German Empire. It was originally known as the Goldmark and backed by gold until 1914.
It was known as the Papermark thereafter.
Source: Bloomberg; Harold Marcuse – UC Santa Barbara; World Gold Council
Case study on precious metal
A Jersey based trustee with some substantial cash holdings has been approached by several existing clients to create a cost effective but secure facility for holding gold.
Key challenges in devising a suitable solution:
the clients prefer to hold physical metal rather than a paper asset such as an ETF
ensuring adequate insurance and audit arrangements can be implemented cost effectively
total costs to be less than 0.25% pa which would be significantly cheaper than a typical metal backed ETF
The above solution can be made scalable by incorporating a Protected Cell Company with each client allocated to a separate cell. Trustee monitoring can be supported by appointing professional audit inspectors that visit each vault location periodically.
We can advise on the selection of international vault operators giving a choice of secure storage locations including the UK, Switzerland, Hong Kong and Singapore. Physical formats for gold can include large 400oz bars, kilo bars as well as coins. Arrangements can be made for clients to inspect the metal in person