Why I Bought Gold.

1oz Gold Britannia

This is not an advertisement but a genuine attempt to pass on my own experience and to explain why I made the decision I did and when.  I am not a natural ‘gold bug’ and I’ve resisted up until this point buying gold, understanding, as everyone should, that although the global economic situation is uncertain at best, precarious at worst, it does not guarantee an increased return on an investment in physical gold, especially as I suspect that there are powerful interests with the motive and opportunity to manipulate the gold price, thus muting the clear danger signal  that a steep rise in gold would normally produce. Although, fairly recently the price of gold has been higher, it is still historically high and my investment had to be based on the presumption that this was the ‘new normal’, atleast, and until  the profound problems within the economic system could be resolved. Seeing no resolution ahead, I felt confident enough to broaden my portfolio and buy gold.

This raises another point because I would never have invested everything I had in gold alone. Looking around I found no other investment opportunity that was without similar or even greater risk. Money in the bank is being deflated, Property values could face a huge slump, Sovereign Bonds, even those from countries thought ‘safe’ are precarious, the Stockmarket appears to be a bubble inflated with QE and unconvincing political reassurances. I was looking for a place to put some money for between 6 and 8 months, under the circumstances gold looked to be a good hedge with minor downsides [accepting the ‘new normal’] yet with considerable upsides. Applying a very personal risk assessment [fairly arbitary too] that there was only a 10% chance that within 8 months the economic situation would be better [a very generous assessment in the absence of a paradigm shift in political attitudes], a 40% chance that it would get worse [extremely conservative], and a 50% chance that it would be the same [generously ignoring that “it being the same” after yet another 8 months would actually be worse], I judged a 10% chance that I would make a minor loss on the investment, a 40% that I would benefit, and a 50% chance that I would neither lose nor benefit significantly.

Why now ?

Not being a trader but instead looking for a hedged investment for 6 to 8 months I was content that although the low volume during the summer might produce volitility in the stockmarket, if the gold price was being manipulated, that same low volume would actually be easier to keep it stable and broadly with the gold price fluctuating between £1,000 and £1,050 per oz  since mid June that has been borne out. But with the return to high volume and with difficult yet unavoidable political decisions pending over the next 3 months I wanted to buy before the beginning of September. Excepting last year the 3 month period from the beginning of September since this crisis began has seen steady increases in the gold price, last year the increase started earlier and peaked mid September. With US Pesidential elections in November, Europe will be left to deal with it’s own problems alone, no incumbant would dream of risking a second term by being seen to bail out the Europeans.

In the end I bought 2012 1oz Gold Brittanias. They are legal tender in the UK with a face value of £100 and as such are not subject to Capital Gains Tax or VAT. I chose the largest 1oz Brittania because it was closest to the Gold spot price. Each coin cost £1,100.

I bought through bullionbypost.co.uk and I was happy with the service they provided.

So, now I’ve put my money where my mouth is, we’ll see over the next few months how things turn out but I’m fairly confident that I won’t lose too much on the deal and could make 10%. I’m not following the daily ups and downs as I don’t expect any big moves for a while but as gold does have a certain power over the imagination I’ll keep a broad look out for panic and bubble over the next 4 months.

Apologies for taking such a long time to return after my holiday. Once the school term starts again things should be back to normal.