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Why Gold and Why Gold Bullion?
As we all know the financial world is still in turmoil (Sep 2010). Many large banks are bankrupt or effectively so. In the USA over 100 banks went into liquidation in 2009 and the total for 2010 looks like being even higher. Although, since March 2009, stock markets recovered much of their 1988 losses that recovery, so far as USA and Europe are concerned, is in our view, a rally in a long-term bear market.
The underlying fundamentals do not these stock market growth at this
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Gold Bullion is not really an investment!
That may seem an odd statement in a page such as this.
Gold pays no dividend, no interest and no rent. In fact it costs money just to own gold.
Gold, especially in these troubled times is in fact a currency. It is a unique currency because governments cannot print more of it when it suits them.
At present Dollars, Pounds and Euros are being printed by the billions and even trillions.
Throughout history this has always had the same effect - to devalue the currency.
It will happen again. Your Dollars, Sterling and Euros will buy less and less but Gold is the one currency that will keep its value.
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Government 'bailout' and rescue plans in USA, UK, and most of Europe have not worked to restore consumer spending and although governments will probably go on borrowing and printing money the stimulus plans still will not work. In USA in a few years time the interest on the money they have borrowed will equal Gross Domestic Product. One does not need to be an economist to see that this is, in the long run, unsustainable.
Countries that have little or no debt such China, India, Brazil and Russia are likely to see prosperity and growth in the future although they will undoubtedly experience setbacks along the way.
But all that is opinion. Neither we nor anyone else can be certain about tomorrow let alone years ahead.
That is why Aliquot Gold and Aliquot Precious Metals have been our featured funds for over 2 years. and it has paid well. Gold is the only investment that has gone up in value every year for the past ten.
Yes, we know gold has just gone through the $1,2509 per ounce level and people are starting to say "it is too expensive". But they said the same when it went from $300 to $ 500 per ounce - "Oh it's too expensive it can't go up any more". Again when it went from $500 to $800 - the same unfounded fears. At $1,00 per ounce we heard it all again but kept buying for our discretionary clients. Now the gold price is through $1,200 and we see nothing to stop it going to $1,500 then $2,000, eventually $3,000 per ounce and probably in a few years much more.
Amongst other factors is the fact that the major banks and government hate gold which they rightly see as athreat to their currencies and have been using all sorts of devices to keep the price down. But that will not be effective forever and eventually the dam will burst.
So we still feel strongly that it is prudent for everyone to have some investment in gold.
As well as the general investment climate there is the currency factor (see inset above).
There are various ways of investing in gold the major being:
- Buying the shares of quoted gold mining companies directly or possibly by way of an ETF or mutual fund specialising in that area. This can be profitable when the price of gold is rising because the value of mining shares tends to rise much faster than does the gold price. Of course, the opposite also holds true. When the price of gold falls the value of gold mining shares can come down very much faster.
When stock markets take heavy downturns then the price of gold mining shares tends to fall in
line with market sentiment although the price of bullion remains steady or even increases as
investors seek safety.
- Buying gold bullion. This can done in several ways. You can simply purchase gold bars at the nearest gold market. Gold bars are better than jewelry because with jewelry you are paying a fee for the workmanship. One problem arising is the safe keeping of gold bars. Household contents insurance will not normally cover the risk of theft which is high. A good safe can be quite an additional expense.
Buy bullion via a bullion dealer who will store and insure it for you at a fee. There are a number of
reputable bullion dealers but if they are not near you the transport costs can be very high.
- Rare Gold Coins are asimilar investment and can be very profitable to those with specialised knowledge. But beware many people have been 'burned' by coin purchases from shady dealers. Before you buy rare gold coins so your homework by studying the subject.
- Standard gold coins such as Krugerand or Canadian Maple Leaf are another matter as you are paying only a little more than the value of their gold content.
- Buy into a gold ETF or a Gold Bullion mutual fund. ETFs of which there are a number, are attractive because of dealing speed and low initial cost. However, very often the fund is not, as it appears to do, holding bullion but only paper promises and one wonders what would happen if a very large number of holders wanted to cash in around the same time.
There only a few Bullion Mutual Funds where, to our certain knowledge, the gold bullion
is held in London or Swiss vaults and we feel these are the ones we can confidently
1. "The Aliquot Gold Bullion Fund" managed by Castlestone Management.
The fund is registered in Guernsey, Channel Islands but managed from London.
CASTLESTONE ALIQUOT GOLD BULLION FUND - KEY FACTS
- Direct exposure to gold bullion. The gold bullion is held in custody by HSBC Bank USA in London.
- Hedge against inflation and insurance against political risk, religious conflicts and unstable markets.
- Independent of changes in stock markets, onds, interest rates and other 'standard' investment areas.
- Aliquot Gold Bullion gives you ownership of gold bullion. No futures, options, warrants, equities or use of leverage.
- The fund provides a hedge against inflation. Over the long run gold bullion has maintained its value in terms of the rate of exchange with other commodities and intermediate products.
Gold bullion has proven to be an effective preserver of wealth
CASTLESTONE ALIQUOT GOLD BULLION FUND DETAILS
Minimum Investment
Class A Shares - $USD 10,000
Class C Shares - $USD 10,000
Dealing Frequency
Weekly (by close of business Tuesday, GMT)
Subscription monies to be lodged by 3 pm on the previous Thursday
Entry Fee
Class A Shares - 3%
Class C Shares - 3%
Class CP Shares - zero
Exit Penalty
There is no exit penalty on class A or C shares.
On class CP shares there is an exit penalty of 5% in year one dwindling to
0% at the end of year 5
Redemptions
Weekly (by close of business Tuesday, GMT)
2. PICTET et CIE Precious Metals - Physical Gold Fund.
Founded in Geneva in 1805, Pictet is today one of Switzerland's largest private banks, with
assets under management and custody totaling USD 358 billion (CHF 386 / EUR 292) at the
end of June 2010.
This an excellent fund but the only way we have into it is via the investment products of Royal
Skandia. Depending on individual circumstances this route can have advantages of apeed and
flexibility.Again, the minimum investment is USD10,000 or equivalent.
If you would like more information on any of these funds please use our " Send us Your Query" form or click HERE.
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