Buying and Holding Physical Gold – Don’t Tell Friends or Family

on Aug 1, 2012
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Buying and storing physical gold as an investment puts you in pretty illustrious company. The government of the United States – and most other world governments come to that – also do it. Of course, Fort Knox offers a little more protection against thievery than a biscuit tin under the bed but the imperative in buying and storing physical gold is more or less the same. Gold is the age-old hedge against the fluctuating values of every other asset – including of course cash.

Bloomberg BusinessWeek this week carried a brief report on the possible sale of online ‘buy and store’ gold dealer Bullion By Post, brainchild of Rob Halliday-Stein and operating out of the jewellery quarter of Birmingham. Halliday-Stein had reportedly confirmed to the Sunday Telegraph (in what one suspects was a wee bit of an infomercial) that he’d engaged valuers Grant Thornton to run the numbers and come up with a credible value. He observed that a sale would raise funds to expand the operation beyond the UK, with Spain being given a mention.

It’s not obvious how selling the business would provide it – as opposed to outgoing owners – with extra capital but doubtless there’s more to the story than the 75 words in the Bloomberg item.
!m[](/uploads/story/216/thumbs/pic1_inline.png)BullionByPost (it’s also written like that – without gaps – on its website) kicked off some three years ago, aiming – in its own words – ‘to offer private investors from across the UK a straight forward, secure way to buy gold and silver bullion bars and coins at trade prices’. But not just buy – to hold, making its key point of difference the fact that whilst you buy online you receive your order in the post, presumably recorded. In a plain brown wrapper. That is not being facetious – bland packaging is used to divert attention from the contents.

At any rate, Bullion By Post reckons that the ownership and possession of physical gold is a much better bet investment-wise than taking a position on ‘paper’ or ‘digital’ gold or in gold futures. Those mechanisms, it says, expose you to levels of risk avoided when buying physical bullion. Especially, the risk of default by the exchange or other medium by which gold-related interests are traded. Bullion By Post’s credo is – if you don’t hold it, you don’t own it. On the page headed ‘Why Buy Physical Gold? Physical gold versus ETFs’, and apparently as a cautionary tale, mention is made of the London Gold Exchange shutting its doors in September 2011. But ‘so what?’ is a question which springs to mind. There’s no suggestion that anyone was bilked by the enigmatic London Gold Exchange.

Nevertheless, Bullion By Post stresses that you can’t go wrong in buying and taking possession of physical gold. You don’t need to keep it in a biscuit tin under your bed of course but if you do the sage advice is to ‘[a]void telling family, friends and work colleagues’. The website suggests that you can have fun thinking up some really clever places to hide your stash at home. Alternatively, ‘for as little as £35 a year’, you can put it in a bank vault. And/or take it on your travels, as you might a pet Chihuahua.

What you can’t of course do with physical gold is get any income from it. From that perspective, its detractors would say that gold isn’t an investment at all – or at best it’s an ‘Armageddon’ investment, stowed away for that doomsday time when currency has crashed around the world and only gold will buy you what you need to survive. It’s a point of view but, really, a pretty far-fetched one.
But if Bullion By Post’s website is to be believed – and why not? – it has no shortage of takers for its particular take on the gold boom. It’d be interesting to learn what the enterprise is valued at but we’ll have to wait for the next press release.

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