How to benefit even when gold falls in value

What to do when gold falls in value

Recent weeks have brought a great deal of volatility to the gold price.

With the Euro seemingly disintegrating in front of our eyes, the investment community have been hanging onto every news headline and economic data release. The hope is to avoid huge losses by staying ahead of the game and shifting money around to avoid catastrophe. Clearly it’s human nature to want to time everything to perfection to avoid any losses at all and maximise any gains. Unfortunately in reality, without the use of a crystal ball, perfect timing is impossible.

The same goes for timing it just right when investing into physical gold. The fundamental economic and political backdrop which has pushed gold prices to record highs remains in place so the medium term outlook for gold is upwards. However, there’s no denying that the path to new highs will be a volatile one. There will be times when gold falls in value. So what can we do to ride out some of this volatility while still protecting ourselves against the economic depression with physical gold?

Download the 10 secrets to selling your gold coins at the highest price here

One great method in these times is to buy small amounts of gold on a regular basis – smoothing out any price volatility along the way. We offer our clients the ability to fix a Sterling amount each month which they wish to invest into gold with our Monthly Saver.

This is proving very popular right now as investors receive more gold for their money in a month where gold prices have come down while not losing sight of the overall strategy of steady accumulation in an asset which looks set to rise in value over the medium term.


It also provides a great alternative to simply putting a few hundred quid away each month into a savings account or ISA. Interest rates on those accounts are below inflation levels so your money is actually losing value in real terms. Meanwhile we all know that while savings are held in Sterling, its all too easy to dip into them and spend any money accumulated. While gold coins are extremely liquid, it is far easier to leave your accumulating savings well alone, allowing them to grow from month to month.

If you opt for UK gold coins, you will also have the advantage that any gains in your GAA will be Capital Gains Tax free so it really is an alternative to an ISA, while also hedging against a falling Pound.

So if you’re concerned about how to avoid the economic meltdown we read about on a daily basis but you’re unsure about timing, drip feeding your money into physical gold can be a prudent method of protection. Remember the saying that applies to so many facets in life – “If you fail to prepare, prepare to fail”, and failing to prepare for the Euro collapsing could spell the end of any wealth you’ve carefully built over the years. Learn to capitalise ever when gold falls in value.


Eurozone crisis: The rain in Spain does not only exist on the plane

Eurozone crisis

In one of my recent blogs at Physical Gold, I wrote about the concept of Contagion. The clouds that now linger, present overwhelming jitters and understandably so. We all speak of Greece exiting from the Euro as an isolated inevitability but as we skim past the surface we can see that Spain and Italy are closely following suit and unfortunately the Eurozone crisis will have significant global consequences. Whilst the US is not hugely exposed to Greek debt it has more than $50 billion each to Spain and Ireland, $66 billion to Italy and $6.6 billion to Portugal.

“The exit from the Eurozone of one or two of the smallest countries may not be disastrous, but a disorderly break-up of the euro that includes either Spain or Italy could well be.”     (Paul Ashworth, chief U.S. economist for Capital Economics)

Whilst exposure to Sovereign debt is devastating, the following factors also need to be taken into account:

  • According to Federal Reserve Chairman Ben Bernanke,  European holdings for the US account for 35% of prime U.S. money market funds in February
  • A Greek Eurozone default risks the freezing of financial markets similar to the aftermath of Lehmans
  • Europe purchased $49.2 billion worth of exports from the U.S in the first quarter of this year, or nearly 13% of overall U.S. exports
  • A Greek Eurozone default presents a significant hit to U.S exports especially as the U.S rely on Europe for its manufacturing, this will slow US business, affect the value of US stocks and US GDP.

New Call-to-action


The significance for global markets is a stark one, especially for the US and in turn – Gold.  As exposure to Sovereign debt manifests itself into hefty losses and global stock markets lose liquidity, European as well as US GDP will diminish and the value of currency both in Euro’s and Dollars will suffer. The cost of goods and services will become more expensive and more currency will be required to the buy an ounce of gold thereby increasing support for gold’s safe haven status. The correlation is an interesting one for gold investors as gold has an inverse relationship to the Dollar. Whether or not the US admits to needing to print more money, the Dollar could face immense depression and with QE as an added bonus for Gold’s upswing.


Global political unrest adds fuel to the gold fire

Being renowned as a safe haven asset, gold is most obviously known to perform well during periods of economic instability. Less obvious is that it also provides essential comfort during times of political unrest.

Political unrest can lead to economic instability

While the current global economic downturn is well documented, we’re also now seeing increasing political instability as a consequence of the financial crisis. This can further support the notion of seeking a safe haven for your money for several reasons;

  • Political unrest inevitably leads very quickly to falling consumer confidence
  • A weak Government can be desperate to maintain political power and its policies can often reflect the need for popularity rather than focus on dealing with debt reduction
  • A ruling party who comes under significant threat from political opposition  can be indecisive as they lose seats and therefore the ability for strong policy decisions, especially in a coalition arrangement
  • A change in power can also provide a change in direction, derailing austerity plans

We are now seeing a number of these examples playing out. In the UK, the

New Call-to-action

already split coalition Government had a disastrous local election campaign, losing many seats up and down the country to Labour. This could be disastrous as the Government becomes increasingly desperate to prove it has the economy under control despite the double dip recession. This could either lead to radical measures in an attempt to prove its resolve or backtracking to pander to public demand. Either way, fingers are already being pointed by Conservatives at Lib Dems and vice versa in the political blame game. The early coalition fissures are now becoming cracks at the very time the UK needs solidarity and strength.

Over the channel in France, new socialist President Francois Hollande wants an economic recovery focused on growth, not cuts. In fact a challenge to the fiscal belt tightening imposed by the EU was pivotal in his election campaign. This has already led to Germany warning France must stick to EU austerity plans.

Political unrest seems even more prominent in Greece as they admitted failure to form a coalition Government due to extreme political rivalry. This has sparked fears Greece will leave the euro – raising the possibility of new elections next month. This could let in the left-wing Syriza party who have vowed to oppose the very austerity measures designed to stabilise the Greek economy. The IMF will only pay the next round of bailout cash if Athens agrees on £12billion of new cuts next month.

Finally, the world’s biggest economy is also suffering from weakness. Barrack Obama has proved incredibly unpopular but is now pushing forward with sweeping policies to leave his mark before the upcoming elections which could undermine their ability to reduce the huge debt mountain. Top of the agenda are student loans and health reforms both of which will cost the Government billions.

The likelihood is that these political pressures will deepen before they are rectified due to the intense economic restraints currently on all involved. One thing’s for sure, I’d prefer to have some gold in my portfolio while I watch the political mire unfold.