GOLD: A MEANS TO AN END, NOT AN END IN ITSELF

August 18th 2020

“As gold’s unquenchable beauty shines like the sun, people have turned to it to protect themselves against the darkness ahead,” writes Peter L. Bernstein in his book, The Power of Gold.

Darkness has unveiled itself in many guises over hundreds and thousands of years, but in 2020, in its present guise of the global coronavirus pandemic, its impact has been far-reaching and substantial.

The price of gold soared to a record $2,047 (£1,538) earlier this month as investors, panicked by fears of a second wave of COVID-19 as well as rising geopolitical tensions and the weakening of the US dollar, rushed to buy the precious metal as a safer place to store their wealth.

“I can think of no clearer demonstration of gold’s role as a store of value than the enthusiasm with which investors across the world have turned to the metal during the unique social and economic turmoil of the past few months,” said Ruth Crowell, chief executive of the London Bullion Market Association (LBMA), in The Guardian. “Gold has once again proved to be the safe haven of choice in periods of uncertainty and high volatility.”

Indeed, private investors have bought so much gold in recent weeks that gold-based exchange-traded fund (ETFs) – funds that anyone can buy into and trade like company shares – now collectively hold almost as many gold bars as the US government does in Fort Knox.

The Guardian piece notes that one single ETF, SDPR Gold Shares, bought 15 tonnes of gold at the start of August, taking its total holdings – secured in HSBC’s London vaults – to 1,258 tonnes. That holding is more than four times as much as the Bank of England has in its reserves.

Debra Thomson, sales director at gold vault company IBV, said that more members of the global super-rich had been buying space in the firm’s vault to store gold bars and coins. “We are seeing more and more people who want to control their assets,” she said. “Putting the physical metal into a safety deposit box means that your future is in your hands – it’s not up to some broker.”

Gold is recognised as a safe haven asset that is able to maintain, and increase, its value during volatile periods.

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