The next generation platform for physical gold and silver investment; reasons to buy Gold Bullion
Will Bancroft, Co-founder of The Real Asset Company shares with us his business model – a next generation platform where individuals can gain exposure to allocated gold more easily and securely. Will also tells us how attractive gold remains in Europe and why individuals who are concerned with protecting their own wealth must consider owning some of the precious metal.
The online market place to buy gold and other bullion
Me: Please describe your business model
Will: We provide an online marketplace where individuals can buy gold and other bullion super efficiently, which is stored in professional market vaults around the world. Our platform and the internet enables individuals to gain exposure to allocated gold more easily and securely than before.
Me: Who is your target customer segment?
Will: Our clients are mostly retail in size, with average accounts sizes of US$20,000. We also have account sizes up to $500,000. Generally we are talking typical retail sized investors who are looking for a specific means of diversification.
Our clients are 70% male and 30% female and generally middle class. In the UK we use socio-economic groupings, and our clients would be A,B,C1s. Occupations range from bankers, lawyers, accountants and analysts, to rock stars, poets, housewives and journalists. We have a real spread of job types and if I had to name an occupation that was most heavily represented, or even over-represented, I would say developers and programmers.
Our clients are scattered between the UK, Europe and North America.
Me: Please make a distinction between your UK and Asians customers
Will: Our UK customers tend to buy gold more for defensive and fear based reasons, whilst our few Asian customers buy gold as a natural thing, knowing that gold is the most superior form of money and preferring to save in bullion on a regular basis.
Me: What is the main reason for individuals to buy gold?
Will: Different analysts will give different reasons here, but I would urge that gold is the best form of financial insurance and an excellent hedge against fiat money and muddled central bankers. Gold is the most ultimately liquid financial asset out there, without credit risk or counterparty risk. It is a unique form of liquidity that retains its purchasing power over the long term.
Me: How much gold is owned in a diversified portfolio?
Will: There is a range preferences here, and everyone’s situation, needs and allocations will differ. I personally am aggressively allocated to gold and gold mining shares – over 65% of my portfolio – but I am young and happy to be highly focused on one asset class at this time. Our clients have differing preferences – ranging from 5% to 80%. Your readers might find this survey information interesting, that we collected from 1,000 readers and clients from around the world (http://therealasset.co.uk/gold-bullion-allocation/). It shows that ‘goldbugs’, as they are often termed, are conviction traders when it comes to gold and prefer heavy allocations to the precious metal.
Me: You mentioned in a previous conversation that individuals in UK are likely to own 2+ percent of gold as part of asset portfolio. How much of that is gold bullion, what other types are there such as ETFs, certificates and so on?
Will: I have not seen any comprehensive data on the breakdown of this 2%, but I know that in the West between 80% and 90% of gold exposure is achieved through physical bullion holdings, as retail investors prefer something tangible and have little trust in financial products. So, using this general guidance I would deduce that ~1.6% of UK private wealth is in gold bullion, a relatively and historically low allocation.
Me: How are your clients storing their gold? Are your customers more likely to A. Take delivery of the gold? B. Store it with you? C. Store it with a commercial vault?
Will: 99% of our customers leave the gold in our vaulting facilities, with the odd larger client opting for our ‘Own Vault’ facility. Once clients get familiar with our system and business model, they usually prefer to leave in in the vaulting facilities, which is the most efficient way to use our service.
Me: Besides selling and storing gold, what other value added services do you provide?
Will: We offer Trust Accounts where people can save and accumulate bullion, for their children, grandchildren or God-children. We also offer a range of savings plans, enabling individuals to accumulate a certain money value of bullion, gold and/or silver, each month as a way of averaging into their precious metal position.
Beyond this we are also looking to expand our delivery service to cover a wider range of smaller bars and also launch a bar registration service, where clients can receive a bar certificate from the source refinery showing the refinery name, bar number, fine weight etc.
Approaching gold with a long term horizon in mind
Me: Are there differences in attitudes, approach towards gold between Europeans and Asians?
Will: Yes. Generally speaking I would say the Western gold market is driven by fear and emotions of worry. Conversely I would say the Asian market epitomises the ‘love trade’, where investors have a deep natural affinity for the precious metal, where cultural norms dictate much higher allocations to bullion and precious metals, relative to the West.
Me: In Asia gold is highly regarded as a way to transfer generational wealth or as a protection during against unfortunate events, are there other reasons to buy gold?
Will: I believe that this reason is the foremost and most sensible reason to buy gold. It is exactly this motivating thought that lead generations of Swiss private bankers to recommend a 10% allocation to gold bullion to their wealthy clients. This advice was intended to help their clients preserve wealth over the long run, whilst also ensuring steady and uninterrupted transfer of wealth down the generations.
Me: Should an individual buy-and-hold gold or buy-to-sell?
Will: We believe buy and hold is the most sensible route for most people. Warren Buffett jokes that his favourite holding period is ‘forever’. Well, I feel the same way about my gold at this time.
However, every asset class has its day, and gold’s day is right now due to abuses of fiat money and central banks run wild. In the future, when the fundamentals behind gold subside, it may be time to sell. But, I believe this could be years away.
Others also feel that we will not sell our gold this time, instead spending it as money in a future gold standard. This is also a quite possible outcome in my opinion.
Me: How long should individuals hold on to their gold?
Will: They should hold until either gold becomes money again, and it is therefore official currency again. Or, hold until monetary responsibility returns to the financial system. The later scenario means no more money printing, no more deficit financing, paying down of debt levels and generally more responsibility in the financial system. This later scenario is difficult to imagine right now after many, many decades of the opposite.
Me: When individuals buy gold bullion, should they be selective about the source?
Will: They should ensure they only buy allocated gold that is their legal property. Allocated gold, which you actually own, is very different to unallocated gold, which is more like a promise to gold from a counterparty. The danger with unallocated gold is that it may not exist and when you need it most, your counterparty might not be able to fulfil their obligations to you. Allocated gold is far better and provides more security and control.
Using a trusted provider is always a good idea too, so check out your broker to see if they are trusted, reputable with a happy customer base. Beyond that, I also prefer to buy bars from the larger refineries I know and trust. Other investors act similarly here, preferring bars from refineries recognized by the London Bullion Market Association and that are on the delivery lists for the major exchanges like COMEX. Personally I favor refineries such as Valcambi, PAMP, Johnson Matthey and Metalor. You can see the largest Western gold refineries profiled here: http://therealasset.co.uk/gold-market-unveiled/.
Me: In Singapore, retail customers buying gold bullion (non-jewellery) are more likely to encounter Maple Leafs and Kangaroos. What are other international ‘brands’?
Will: The most famous coins are US gold and silver eagles, UK gold and silver Britannia’s and sovereigns, gold Krugerrands, Canadian gold and silver Maple Leafs, as well as the coins you mention. I’m not surprised to hear of Australian coins making their way up to Singapore, although it seems more surprising to hear of Maple Leafs doing the rounds there.
Me: Is there any difference?
Will: I’m not a coin expert, so I cannot really say, but after ensuring the coins are legitimate and of the right purity, most investors are looking at the tax angle in their country. For example – in the UK, people like to buy gold coins that are legal tender’, so there is no capital gains tax payable on them.
Note to Singaporeans: There is no 7% Goods and Services Tax GST on Gold as long as it is at least 99.5% purity and tradable on International Bullion Market.
Me: Do you see gold becoming part of a business’s balance sheet?
Will: I do, but I think this could be a long way away. Using gold and silver as another form, a preferred form, of liquidity, would be a real message from the companies of the world that they no longer have faith in government issued, fiat money. At this time I only know of a few, quite small, silver miners that use silver as a partial substitute for cash. Eric Sprott talked about this a few years ago, hoping to encourage more miners to do so.
It would be a real signal of a changing monetary order, when companies that we’ve all heard of were settling trade and transactions in gold. I can see it happening one day, when this largest ever of fiat money experiments comes to an end.
Me: What about family-owned enterprises?
Will: Why not? I suspect family owned enterprises, being more agile and responsive, might be the first movers here before larger corporates cotton on later. I might suggest the prudent, well run, small business sector in Germany might be something to watch for here. The Germans are some of the biggest gold buyers in Europe and are open to common sense economics of the Austrian school, that gets less air time in the UK and US.
Me: Individuals may be fearful of buying gold online, how do you intend to overcome that?
Will: It’s all about proving you are a trustworthy and reputable business, in what is often the first time individuals have bought gold, let alone bought it online. The way we seek to win client trust is by operating a business model that is very transparent and markedly different to most other investment firms in the financial system – where their allocated gold can never appear on our balance sheet. This means the clients do not have counterparty risk to ourselves. After this we show statement from the vaults providers allowing clients to see that the platform is fully backed 1-1, and we have instructed a well-known UK auditor to further verify that platform holdings are fully backed by bullion in the vaults.
We also produce a huge amount of research and commentary for our clients to read and use to learn their way into the issues surrounding the gold market. That fact that analysts, like Jan Skoyles, go on TV and talk to journalists like Max Keiser on Russia Today, shows that we are real people, with a deep passion and focus for the subject. Being domain experts is important for our clients too.
Winning client trust is our foremost priority, everything else comes after this.
Me: Do you have any advice for readers?
Will: Keep calm, buy a bit of gold each month, in the same way people normally save in cash. Learn as much as you can about money, central banking and markets to improve your knowledge, grow your world view and help you protect your wealth. Too many people say ‘I don’t have time to learn about finance’, ‘I don’t know where to start’. It’s not impossible and taking the first step is the most important one to financial freedom and knowledge.
If you think your financial future is important, get reading and take control. If readers are looking for a good first step, I’d recommend Jim Rickards’ book ‘Currency Wars’, or Ron Paul’s ‘End the Fed’, as excellent and accessible places to start. I have never thought about money and banking the same way after reading Ron Paul’s book. Good luck and good investing!
Important takeaway from this interview
Will Bancroft gives us insight into the role of gold in international finance and how wealthy individuals protect their wealth. My own takeaway can be summarised in this way:
- The international monetary system is an ongoing experiment.
- It is up to individuals to look after their own wealth; ensure that there is purchasing power during needy times and to pass wealth to the next generation.
- Taking care of the Now and the Future can be done concurrently by preserving ‘liquidity that retains its purchasing power over the long term’.
- Will brought up 2 numbers here and that is A) the Swiss tell their clients to have 10 percent gold B) by his estimates individuals in UK have around 1.6 percent of their wealth in gold. I don’t know how much gold Singaporeans or Asians are holding in their portfolio but if the number is like the UK, then gold is under-represented.
- Gold is a buy-to-hold long term investment.
- Thrift is good. Keeping some savings in gold is good. Take the first step towards financial freedom and knowledge is good. Starting yesterday is best but starting today is not too late.
Will Bancroft is Co-Founder of The Real Asset Company, a market place for individuals to invest in gold, silver and precious metals. Will also contributes commentary and analysis to the Research Desk. His interest in financial markets and investment led to a keen interest in monetary economics, gold and silver. Will is passionate about gold’s role in a portfolio and his views appear on sites and media such as Kitco, Market Oracle, Seeking Alpha, Stockopedia, The Telegraph and Yahoo Finance. Follow Will on Google+, and get his commentary via our RSS feed.
The Real Asset Co.
The Real Asset Co. is a next generation platform for physical gold and silver investment. Our open market enables you to set your own rates, meaning competition in the market provides you with fairer and more efficient gold prices.
You buy pure bullion from the professional markets, stored in LBMA approved vaults used by the professional markets.
Enjoy our flexible range of storage and delivery options for greater security and control with your investments. You can even open your own personal vault account, and have bullion delivered to your home.
Open an account in minutes to test our platform with your welcome gift of a free ounce of silver.
For more information contact: firstname.lastname@example.org
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