Our cash still isnt safe

Cash isn’t king any more

Over the past month British savers can’t be blamed for feeling a little smug. With very little news regarding UK high street bank bailouts, we were left to read how Cypriot banks were raiding their own clients’ cash to fund a bailout. Sure, our savings return well below inflation but at least our principal amount is safe – isn’t it?

Unfortunately, this temporary respite was shattered last week when top ratings agency Moodys downgraded the Co-Op bank to junk status. Rumours are that the Co-Op will need a bailout due to huge potential losses on property loans. Regardless of the extent of these possible real estate losses, the junk status means it becomes impossible for the Co-Op to riase funds at a reasonable price.

Don’t forget that it was the Co-Op who were suggested as the possible buyers of a portion of Lloyds’ business so the knock on effect is wider spread than merely Co-Op customers. It will put the brakes on other high street banks looking to rebuild after the devastation of recent years.

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What it tells me is that customers simply aren’t compensated for the risk they now take by depositing cash in a bank. Investments and savings should reflect a simple equation, the more risk you have, the higher the reward. That being the case, I’m not sure that a 1% savings return is fair to leave your money with a ‘junk rated’ institution.

Protect yourself with gold

It always makes sense to leave some money as an emergency fund in cash. However, diversifying into physical gold means that you don’t have any counterparty risk. This means it doesn’t matter if the banks go under, the Pound is destroyed or even if the UK itself is downgraded, you own the tangible metal so you’re protected. Gold has returned more than inflation over the years and if bought in the form of UK coins, is also tax free.

It’s always tempting to hope that the economy is out of the woods if you don’t hear any bad news for a few weeks. However, common sense tells us that there is still pain to come, perhaps with further bank closures or even the UK banks raiding our savings to bail themselves out! Therefore gold remains a decent hedge in these turbulent times.PHYS01_Animated_Gif_2_MPU


Is it the right time to buy gold?

Is it the right time to buy gold as an investment?

Over the past 2 weeks, we’ve seen a huge spike in demand to buy gold as the gold price presents a fantastic buying opportunity.

Many clients felt the price was a little directionless for many months and have been waiting for a reason to invest in gold. The recent price fall has provided the much-needed impetus to gold. The fact that it has been oversold (due to panic selling) means that the price is even lower – providing the opportunity to get a lot more gold for your money now than a year or so ago. So clients who have been waiting on the sidelines have now bought as they realise the price offers good value, the environment for gold is still strong and the fact there are few decent alternatives to put your cash.

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Spike in customers wishing to buy gold

In particular, we’ve recorded

  • Approx. 50% increase in enquiries
  • Approx. 35% increase in sales
  • Our most popular enquiry during this frenzy being Tax-free coins

We’ve also seen many existing buyers returning to the market who bought at previously higher levels. This price fall allows them to lower their cost price average.

buy gold

We are now starting to experience physical gold shortages. In particular, there are waiting times on some gold bars of up to a month, a real difficulty in obtaining mixed year Sovereigns and I anticipate waiting times to develop on the new 2013 tax-free Britannias and Sovereigns – perhaps to around 203 weeks. However, clients are willing to transact now and wait for delivery as they want to secure the current price as they feel it will only go higher over the next few weeks. I would expect premiums on these coins to be unstable as possible increases reflect a lack of supply.

Clients who started pension gold paperwork a few weeks ago (before the price fall) are now able to buy the same amount of gold for their pension at a14% lower price than when they started the process!

The gold price adjustment demonstrates its volatility so it certainly isn’t for the short term investor. However, for those looking for a medium to long term security, buying in the dips makes perfect sense in attaining the best possible value.

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