Why I bought gold at the top (and put it in my pension)

Mouthy Money Editor Edmund Greaves explains his decision to buy gold – which is at all-time highs – and put it in his pension.

I like gold. I come from a family of Italians that like gold. So much so that we wear it, on necklaces, rings and other assorted jewellery.

There’s an interesting historical thread here that runs from my family’s predilection for wearing the precious metal that runs back through thousands of years of history. 

In times gone by, Celtic warriors (and other cultures too but let’s focus on the Celts for today) wore things like gold torques and bands on their bodies. This served two important functions:

1. It was a symbol of prowess and prestige – both on the battlefield but in terms of softer power too. It was a case of ‘look how wealthy I am’ because your wealth is quite literally worn on your body.

2. It was a form – weirdly enough – of banking system and currency. Bands of different sizes came in standardised weights and measures and could be dispensed with or exchanged depending on the agreed market value. 

What’s all this got to do with my pension?

Well, gold is the most-persistently relied upon store of wealth humanity has ever produced. It has the longest track record of any asset ever.

Indeed, most currencies and economies relief upon some form of gold standard by which to measure their currencies until fairly recently. The UK abandoned its gold standard in 1931 while the US only ended its own gold standard in 1971.

The gold standard was a system by which the money you used was guaranteed. In theory you could exchange a pound coin for its equivalent value of gold with the Bank of England.

But in practice we left the gold standard because it created significant economic limitations and caused problems for governments. 

Why I put gold in my pension

This brings me to today and why I’ve put some gold in my pension – despite it being at all-time high prices. 

Gold is often referred to as a safe haven. What do we mean by this? It means it has no correlation with mainstream growth assets such as stocks, nor does it correlate to income-generating assets such as bonds. 

In short, it has a unique appeal because of that deep historical sense as an asset that can’t be readily manipulated. And this brings me to why I’ve allocated some of money to it in my pension.

The world is in a difficult place. Governments are struggling to pay their bills and investors are demanding higher interest rates to lend to them. On the flipside, money printing and inflation don’t look like they’re going away any time soon.

As our currencies devalue, it is essential for long-term savings to be housed somewhere where they’ll beat that inflation level. Gold is an inert metal – it doesn’t generate an income – but generally speaking its value has always stayed ahead of inflation. 

It provides a distinct hedge against stocks and bonds precisely because it is not a financially constructed instrument.

Indeed, if you wished, you could actually buy the physical metal from providers such as the Royal Mint. These, in some denominations, even come with tax benefits such as no capital gains tax (CGT) liability. 

The problem with the physical metal though is it is hard (and risky potentially) to store. 

Putting it in my pension is a compromise that works because the ETFs which track the price charge very low fees generally and my pension provides a lot of upfront tax benefits to aid in investment growth. 

Ultimately I’ve bought gold because I can’t see how governments are going to rein in their spending and money printing. Yes, gold is at all-time highs. Yes, it might do down. But the fundamentals of ‘printer go brrr’ as the very online call it, aren’t going away. 

The bitcoin question

The big question here now is, what if gold isn’t the only one? This is where things get a little more controversial. Bitcoin is now widely considered to be an ‘alternative’ or ‘safe haven’ – particularly when it comes to governments printing their fiat currencies into infinity.

The interesting point here too is that the UK is about to lift its ban on holding bitcoin-related instruments on platforms and through tax wrappers such as pensions and ISAs.

So my takeaway here is that if I’m going to hold a bit of gold as a differentiator to the normal economy, why not have some bitcoin too? And why not hold it in a tax efficient wrapper?

Bitcoin discourse becomes very heated and passionate very quickly. I try to remain dispassionate, particularly with my investments.

But at this point, if big financial institutions are holding it (almost certainly as a hedge against the financial system they’re a part of) then why shouldn’t I?

I just don’t plan on putting all my eggs in that particular basket. For now at least. 

DISCLAIMER

This article is produced for general informational purposes only. 

It should not be construed as investment, legal, tax, mortgage or other forms of financial advice. 

If in any doubt about the themes expressed, consider consulting with a regulated financial professional for your own personal situation. 

Past performance is no guarantee of future results. 

Investments can go down as well as up and you may get back less than you started with. 

Investments are speculative and can be affected by volatility. 

Never invest more than you can afford to lose. 

For more information visit ⁠⁠⁠www.fca.org.uk/investsmart⁠