Investment
Fool’s gold? There’s nothing silly about investing in this precious metal
GOLD RUSH
GIVE YOURSELF THE MIDAS TOUCH WITH A PRECIOUS METAL INVESTMENT
words: elisa anniss
THE RECENT RALLY to gold, not to mention its volatility, has hit headlines and garnered column inches in leading financial oracles around the globe. Most of them, but not all, have been good. Campaigner and environmentalist, Vanessa Redgrave, recently got in on the act. She used a Transylvanian film festival awards ceremony as an opportunity to condemn the plans for a new open cast gold mine [such mines are used when deposits of commercially useful minerals or rock are found near the surface and don’t require tunnelling into the earth] in Romania by Canadian firm Gabriel Resources. They also just happened to be a sponsor of the festival.
Currently, any investment linked to gold reaps rewards, whether in exploration, mining, or jewellery – antique or new. So why, suddenly, is gold so sought after?
Like many other commodities, gold tends to run in long-term cycles. Its last high point was in 1996, when it reached about US$420 per oz. What followed was a boom in technology (a criticism of gold as an investment is that it doesn’t pay either interest or dividends). By 1999 gold had taken a sharp slip downwards to US$260 per oz and fallen out of favour as an investment asset. Fast forward to 23 June 2006, and the price is back up to US$580 per oz (down from the highs of US$720 per oz a month earlier in May 2006, but still up US$140 per oz compared with a year ago).
A senior advisor at a Vancouver-based company that invests in and finances natural-resource operations attributes this shift to the fact that in 2002/2003 there was a realisation that the US dollar was overvalued compared with other global currencies. As a result, other major currencies such as the yen, euro, sterling and gold (considered by many as an alternative currency) saw both renewed investment and appreciation. Also, surging gold prices prompted the US Treasury to issue the 2006 American Buffalo Gold Proof One Ounce coin – the first pure .9999 24 carat gold coin ever issued by a US government.
According to this Vancouver-based adviser, another aspect of the move away from gold in the 1990s resulted in the curtailment of exploration. So, for example, in the case of one of the largest gold producing countries – South Africa – gold production has now fallen to levels below those of the 1920s.
As a result, over the last couple of years there has been an increase in investment in both gold producers and exploration in companies such as Barrick Gold, Gold Corp and Newmont Mining. And a lot of this has come from the fast-growing ‘hedge fund’ business.
Gold once held mythic status in ancient Egypt, Greece and Rome – take, for example, Jason’s epic journey to secure the Golden Fleece or Howard Carter’s Tutankhamen discoveries. Centuries later, when the conquistadors landed in South America they encountered Aztec and Inca societies in which gold was revered. When Cortés reached Mexico in 1519, weapons so alarmed Aztec Emperor Montezuma that he tried to broker a peace deal using priceless gifts of gold – to no avail.
Further south in Peru the story had a similar ring. A highly developed civilization, the Incas advanced the gold-mining techniques of their predecessors. In 1532, Francisco Pizarro invaded the country and captured the ruler of the Incas, Atahualpa. Back then, Cuzco, the Inca capital, high in the Andes, was literally dripping with gold. The Temple of the Sun was one of the marvels of the time, with almost every inch of its walls covered in gold. But in the 21st century, anyone starting out from Cuzco to tread the intrepid Inca trail to Machu Picchu will discover that the city no longer glitters gloriously. This is because gold from South America was melted down and shipped to Spain to fill Europe’s coffers.
These days, procuring gold tends to be a lot less brutish and more of an emotional experience, according to Alexandra Rhodes, senior director and senior jewellery specialist for Sotheby’s Europe. “At the moment we have very good sales internationally. However, with jewellery, the ‘wow’ factor has to come first.
It’s very personal and you have to buy it because you love it. Investment has to be secondary.”
GOING FOR GOLD
THE WORLD GOLD COUNCIL: +44 (0)20 7826 4700; www.gold.org
GABRIEL RESOURCES: +1 416 955 9200; www.gabrielresources.com
UNITED STATES MINT: +1 800 872 6468; www.usmint.gov
BARRICK (Canadian mining company): +1 416 861 9911; www.barrick.com
GOLD CORP (Canadian mining company): +1 604 696 3000; www.goldcorp.com
NEWMONT (Canadian mining company): +1 303 863 7414; www.newmont.com
SOTHEBY’S LONDON: +44 (0)20 7293 5000; www.sothebys.com
SARAH KING: +44 (0)20 7226 8712; www.sarah-king.co.uk
AMRAPALI AT THE OBERAI HOTEL, MUMBAI: +91 222 284 3687; www.amrapalijewels.com
TOCQUEVILLE ASSET MANAGEMENT: +1 800 626 9402; www.tocqueville.com
THE GOLDSMITHS’ COMPANY: +44 (0)20 7606 7010; www.thegoldsmiths.co.uk
GLITTERING PRIZES
WHAT TO LOOK OUT FOR WHEN BUYING GOLD
1 “If someone is interested in gold jewellery then India is definitely the right destination due to the excellent craftsmanship. But for investment in gold bullion they should buy gold from the London bullion market or any Swiss bank,” says Tarang Arora of Amarapali, who has outlets in Knightsbridge and The Oberai Hotel, Mumbai. “The trend for buying jewellery is veering toward gold. It has the advantage of being on trend – particularly with yellow gold catching up. For investment purposes the higher the carat the better – a good buy for investment gold would be 18ct and 22ct.”
2 “There is no advantage in holding one colour of gold over another, they simply reflect different alloys,” explains John Hathaway, a senior managing director and portfolio manager for all Tocqueville Gold products, including the Tocqueville Gold Fund at Tocqueville Asset Management in New York. “The best places for buying gold items are probably Dubai, Riyadh, or Jeddah.”
3 ”Artist- and designer-jewellers only use 18 carat gold. It has a richness of colour and is malleable but strong,” comments Rosemary Ransome Wallis, Curator of the Collections at Goldsmiths’ Hall. “Few people realise the importance of understanding hallmarks as a confirmation of investment, particularly the standard of fineness of gold as a metal and the sponsor’s mark identifying the maker.”
4 “Designer-makers in London, many with studios in Clerkenwell (conveniently close to the suppliers in Hatton Garden), have their own hallmarks, making unusual pieces often with a particular style or technique,” says London-based designer-jeweller Sarah King. “If the piece is also a gift, the personal aspect of commissioning it is an exciting experience and results in a unique piece.”
5 “You should be looking at the quality, workmanship and it’s also got to be a great design and well made to be an investment,” says Alexandra Rhodes, senior director and senior jewellery specialist for Sotheby’s Europe. “Colour is about fashion rather than value. From 1900-1940 white gold and platinum were in vogue. Gold was bold after the Second World War with yellow gold popular up to the 1950s. There was a lot of Sputnik-inspired white gold in the 1960s, then in the 1970s and 1980s yellow and white gold became popular.”
jewellery: sotheby’s, sarah king
