I have written with some frequency about the astounding rate at which the world’s central banks have been stocking up on gold. There is no sign of that trend slowing. Recently, Jeff Currie, the head of global commodities research at Goldman Sachs, appeared on Bloomberg Television to reiterate his confidence in gold over the foreseeable future. During the interview, Currie surprised host Alix Steel by noting that “demand from central banks for gold is biggest since the Nixon era, eating up 20% of global supply.” Central banks’ love affair with gold appears to only be growing stronger.
It is not just central banks turning to gold to help protect their enormous portfolios, however. A recent article at Yahoo Finance reveals information showing that gold buyers around the world are relying to a high degree on the physical form of the metal – rather than securitized gold – to protect their savings. According to one of the world’s best-known investment banks, the sharp trend toward physical gold is influenced by high-net-worth individuals who believe physical gold is the surest way to protect their portfolios during periods of economic and geopolitical upheaval. If the world’s financial elite are opting for physical gold to help secure their money, it certainly could be an excellent way for you to safeguard your own hard-earned savings.
Goldman Sachs: Physical Gold, Not Securitized Gold, Is Favored Way to Hedge
The Yahoo piece digs into a recent client note from Goldman Sachs analysts that says gold buyers are choosing physical gold to keep portfolios upright when economic seas turn stormy.
Referring to the chart I included below, Goldman writes, “Since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs.” In other words, for several years now, hedge-minded savers have demonstrated a strong preference for physical gold over gold-backed securities.
In fact, except for a relatively brief interval during 2016, physical gold has been the more popular way to own the metal going back many years. This includes periods when gold consumption was dropping overall.
As for the sharp ongoing rise in gold-buying, the Goldman note indicates the data “is consistent with reports that vault demand globally is surging.”
The note also spells out why Goldman says we’re seeing this steady accumulation of physical gold at a rate much higher than that of securitized gold:
Political risks, in our view, help explain this because if an individual is trying to minimize the risks of sanctions or wealth taxes, then buying physical gold bars and storing them in a vault, where it is more difficult for governments to reach them, makes sense.
Finally, this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios in which they do not want to have any financial entity intermediating their gold positions due to the counter-party credit risk involved.
Goldman’s conclusions contrast sharply with the common perception that people who purchase gold as a hedge are content with securities only. A criticism frequently made of physical gold is that it’s not as easy to transact as gold securities. The longstanding assumption is that many who are interested in buying gold are looking solely for a price increase, but the data seems to disagree. It appears that, by a substantial margin, those interested in purchasing gold as a portfolio hedge also want to own it because in its physical form the asset is remote from governments and financial institutions.
Physical Gold’s Protective Power Can Benefit Any Portfolio
By now, it’s perhaps the worst-kept secret in portfolio management that there’s a trend toward commercial banks, hedge funds, ultra-wealthy individuals and even the world’s central banks looking to gold for protection against a possible economic meltdown. The fact that these companies, agencies and individuals insist on stockpiling physical gold rather than securitized gold is revealing. It underscores the reality that you have to own the physical metal to make the most of gold’s potential as a multidimensional protection asset.
You may not (yet) be among the world’s financial elite, but there is little doubt your hard-earned retirement savings means as much to you as their money means to them. And if those with so much to lose are choosing not just gold but physical gold to help preserve their portfolio security and financial independence, then it makes sense for you to do the same.
You may be thinking, “Great, but I don’t know even know where to begin to learn about adding physical gold to my personal inventory.” That’s a common problem. Very few banks and other financial institutions offer tangible gold (or silver) as a portfolio option. This is where Augusta Precious Metals can help.
When you call Augusta at 800-700-1008, you’ll speak with a knowledgeable gold and silver professional who will honestly, cheerfully and patiently answer all of your questions about buying metals. You will also have the opportunity to learn more about the gold IRA, a highly innovative retirement account that enables you to purchase your physical gold and silver under a tax-advantaged “umbrella.”
And there’s more. Qualified individuals and families now have the opportunity to sit in on Augusta’s exclusive live Profit & Protect Web Conference with our resident economic analyst. This 30-minute presentation offers a comprehensive overview of the daunting challenges facing retirement savers today and also outlines effective strategies that can help overcome those challenges. It’s worth noting that none other than hall of fame quarterback Joe Montana attended this same web conference. Joe found the presentation to be so interesting and helpful that he not only became an Augusta customer, he decided to serve as our corporate ambassador. When you call us to learn more about physical gold and silver, be sure to ask the Augusta representative you speak with if you’re eligible to participate in this compelling web conference.