When the going gets tough, the tough go shopping. And when the going is seriously tough — as it may be when Trump and Putin really start stirring global trouble — they shop for gold.
And where could be more convenient to do so than at Sharps Pixley in St James’s Street? The shop front is painted a discreet golden hue and in the windows there are fabulous golden roses. The security man releases the door and the shop assistants greet you with a quiet: ‘Can I help you, Madam?’ On a giant television screen, the live gold price flashes; as at 22 February, after some Trump-provoked wobbles, it stands at $1,237 (£991) per ounce.
Ross Norman, Sharps Pixley’s chief executive, explains why gold is still the ‘safest haven’ of all asset classes and why physical gold is for everyone, ‘not just the privileged few’. Clever-clogs who bought gold last year have so far done very well indeed. Since the Brexit vote, UK gold investors have made nearly 30 per cent on their holdings, largely because of sterling’s fall against the dollar. For now, £41 will buy you a gram of gold, while the usual entry level for gold investors is one-ounce bars at £1,044 each.
Or you can go straight for the one-kilo bars, about the size of an iPhone, at £33,130 each. Norman gives me one to hold; it’s cold and heavy, its shininess like the golden wrapping of a chunky caramel chocolate bar. You see why the Egyptians called it the ‘breath of the gods’; there’s something primal about holding the bullion in your hands.
Some shoppers take the bars home in bags, but most store them in safe-deposit boxes in the shop’s vaults. There are more than 200 gold and silver products for sale here. Real roses dipped in pure 24 carat gold, from £100, are a bestseller.
Typical gold buyers are doubters, says Norman. ‘Our customers buy because they have no confidence in the world’s institutions. They don’t have faith in banks or the sustainability of a financial system overloaded with debt. They worry that countries will not be able to pay down their debt. They want security.’
Capping all their worries is the return of inflation — the ‘thief in the night’, as Ronald Reagan once described it. Their biggest fear is that the thief is now creeping back fast. And longer term, investors have been rewarded for their prescience. ‘Over the past 16 years, UK gold investors have seen a 410 per cent gain,’ adds Norman. ‘That’s 12 per cent per annum compounded and ten times more than you would have earned by investing in the FTSE 100.’
Norman’s customers come in surprising shapes and guises. ‘A young couple from Liverpool came in recently in total disbelief that they could just walk in and buy over the counter; and they did.’ Staff know never to make assumptions about what people can or cannot afford. Recently an elderly man in a grubby raincoat came in for a chat, says Norman. ‘He asked for my thoughts on gold. I gave him my views and then asked his, which were very sophisticated. He turned out to be a FTSE 100 chairman.’
Setting up Britain’s first upmarket walk-in gold shop was ex-gold trader Norman’s idea. He had become frustrated that the wider public could not easily buy physical gold. This year he reckons Sharps Pixley (owned by German bullion dealer Degussa, owned in turn by the super-rich von Finck family) will sell £100 million worth of the precious metal.
But where will gold go next? Its all-time peak five years ago followed a spectacular post-financial-crash run when everybody and their grandmothers (particularly Chinese matriarchs) piled in. Since then gold has been licking its wounds as speculators in the futures market and investors in gold-based Exchange Traded Funds have been selling out.
Historically, a new US presidency nearly always bring higher gold prices. Since the 1970s, gold has seen gains of almost 15 per cent in each inaugural year. What happens to the dollar is key. Trump wants a lower dollar to help him spend on infrastructure and if he succeeds in talking the currency down, gold will keep flying. But can it return to the high of $1,922 (£1,211) an ounce reached in 2011? Who better to ask than market veteran Peter Hambro, a true ‘gold bug’ — someone who has confidence in the value of gold through all seasons. ‘The point about gold is that it’s a store of value and a medium of exchange. More importantly, gold does not rely on anyone else’s promises, as currencies do. There’s no subjective judgment involved.’
Hambro owns golden coins minted in Belgium some 2,000 years ago: ‘With these, I can buy the same amount of bread that people who once owned them thousands of years ago could. If you were in Syria or Libya today, what would you want to take with you if you want to get out? Gold is always the safest bet.’
He keeps his own safety net close by, too: a money clip with two US golden coins tacked on to it, inherited from his father. ‘He always told me that this is my air ticket to escape from wherever you are in the world.’
And that’s the point. gold prices may fluctuate, yet it has held its precious status since pre-Columbian times. Hambro is confident the price will keep rising. ‘Worries of trade wars between Trump and China, and between Putin and the West over the Middle East, have kept the gold price firm and moving up again over the last few months. Supply is tight too, with gold exploration at its lowest for more than a decade.’
Tony Dobra of Baird & Co, the UK’s only integrated gold refiner and maker of gold bars, also predicts gold on the march again this year. Dobra, who sold 100,000 gold bars and 400,000 coins last year, takes a non-partisan view of gold’s trajectory — he does well either side of the trade. Even so, he reckons the metal is undervalued and that it’s always best to buy physical metal rather than mining shares or ETFs. ‘The charges are not so high… physical gold also allows investors to track the real price. Why would you want the euro, the dollar or the renminbi today?’
It’s a good question. Yet the bigger question is whether gold will stay sacred, or whether its value is as notional as, say, the 3,000 or so ‘fiat currencies’ that have ceased to exist over the centuries? Rhona O’Connell, gold guru at GFMS, believes gold really will stay sought after, as much for its aesthetic beauty as its intrinsic value. ‘Gold has muscled its way into our conscience. That’s unlikely to change any time soon.’ What’s more, she predicts a high of $1,400 by the end of this year. Time to go shopping?