Physical gold demand surges as political risks heighten uncertainty
Over the last seven days, The Pure Gold Company has seen a 378 per cent increase in first time investors purchasing gold bars and coins compared to the weekly average for 2019. What's more, there has been a 63 per cent increase in financial professionals and bankers investing in physical gold, according to the firm.
"Many people are deeply concerned that there will be a severe global recession driven by systemic geopolitical risks. As a result, we now have many more wealth managers and IFAs advising clients to purchase physical gold in response to clients requesting a safe and tax efficient store of wealth," says Josh Saul, CEO of The Pure Gold Company.
Over the last 12 months The Pure Gold Company has seen a 117 per cent increase in referred business from wealth managers and IFAs, and since the beginning of May, the firm has seen a 412 per cent increase in the amount of people remove exposure to equities within their pensions or SIPPs to purchase physical gold within the same vehicle.
The gold investment firm is seeing a Europe-wide drive in sales although it is more concentrated in the UK, Germany, Italy and the Channel Islands. It also supplies many residents who live in the USA who are particularly concerned about the trade war with China and what this will do to global markets.
Saul (pictured) adds that many of the firm's professional clients have cited the suspension of Neil Woodford’s fund as an example of what could happen to gold backed ETFs or other funds, adding "If everyone tries to get out, exit doors become small."
Purchasing physical gold is a way of removing wealth from the financial or banking system and bypassing counter-party risk, explains Saul. "Our clients are chiefly worried about counterparty risk. Banks across the Eurozone, from Germany to Italy to Spain are under extreme pressure, and the memory of Lehman Brothers is still raw. A gold-backed ETF is supposedly backed with 100 per cent physical gold, but many people, including the bankers that purchase from us, believe that given gold’s finite availability, it is impossible for every certificate holder to be backed with 100 per cent metal. And if there was not enough metal to satisfy every certificate holder, people would be left holding nothing but a piece of paper."
Compared to gold ETFs and gold funds, physical gold is easily transferable, and very quickly liquidated anywhere in the world. The Pure Gold Company offers a buy back guarantee on the gold it sells and clients can liquidate quickly.
Physical gold not only removes wealth from the financial system, it is used as a hedge against the uncertainty of both currency movements and market volatility as part of a balanced portfolio. Some investors might put up to 15 per cent of their wealth into physical gold, while others who have just sold a property and plan to buy another in the next year or so invest much more than that in gold. Depending on the balance of assets, some don’t actually want to see their gold increase, because that would indicate that other assets like equities are falling.
"The turmoil won’t last forever but gold is a sound option while there are so many layers of uncertainty - like all insurance policies, it lessens the blow," adds Saul.