A VERY Positive Gold Bug Story....
Sharemarket turmoil has focused investor
attention on havens - the yellow metal is a port in
a storm.
The gold bugs are back. But the rush isn't just for gold
coins or mining stocks. It is also for the hardcore gold
bar, which can weigh as much as a concrete block
and can cost as much as a small house.
"I bought the big brick-like things, doorstop size," says
Crispin Odey, a London money manager who acquired
a few 400-ounce gold bars (roughly 12.5 kilos) for
himself about 18months ago.
Odey, who likes to feel the €125,000 ($225,000) gold
bars in his hands, adds, "My wife hates them because
she thinks they are ghastly and wonders why it can't be
jewellery."
For years, gold buyers have been scorned as
investment Neanderthals, and buying the bulky bars -
more associated with central banks than with personal
investment accounts - may be the most old-fashioned
way to do it. Odey, 43, says that when he asked his
private banker to purchase the gold bars for him, it was
the first time the bank had bought any for 10 years.
But Odey isn't alone. Banks and gold refineries say
gold-bar sales surged as stockmarkets tumbled.
Overall sales of gold for investment rose 36 per cent
during the first quarter from a year earlier in North
America, Europe and Asia, according to the World
Gold Council.
Even Hollywood has caught a version of gold fever with
a parody of the James Bond classic Goldfinger. In this
summer's Austin Powers movie, the evil Goldmember
wants to attract a massive block of gold from space so
it will crash into Earth like a meteorite.
Never mind that gold as an investment has had a
dismal track record since 1980, when prices peaked at
$US850 an ounce. The price was stagnant through
most of the 1990s. The price is now around $US314
an ounce, up 12 per cent from the start of the year.
"Only in the last nine months would gold have been a
good buy," says Leonard Loventhal, a financial lawyer
in Chicago. "I have a client who bought gold many
years ago and regretted it. He took a huge loss."
Still, Mike Kramer, head gold trader at precious-metals
dealer Manfra Tordella & Brookes in New York, says:
"Last week was our busiest week in years."
Dieter Schuetz, a spokesman for Commerzbank of
Germany, says: "Everybody is burning so much money
in the stockmarket, and that is why they are now
interested in gold." Some Commerzbank branches
offer the bars on site, while others order from larger
company vaults.
Gold bar buyers can order directly from the factory,
too. Tony Baird, managing director of Baird & Co, an
East London gold processor, says some people prefer
the 100-gram bar, which looks more like a dinner mint,
except that it costs about €1200. The larger one-kilo
block, valued at about €10,200, looks like a giant candy
bar.
Baird says there's also been an increase in sales of
the 400-ounce bars. One fits neatly in a brief case, "as
long as you have big strong arms to carry it", says
Baird, who has been selling gold for 35 years.
The new generation of gold bugs say they know they
may get burned but feel they have run out of
investment choices. "For 20 years gold hasn't been a
good investment," says Odey, who says gold is just a
tiny part of his portfolio. "It hasn't kept pace with
other
investments such as stocks and real estate."
But Odey says he enjoys touching the gold bars, which
do indeed glitter.
Other gold buyers say the investment gets an unfair
rap. "Gold holds its value," says independent financial
adviser and longtime gold investor Charlie Aitken of
Lee-on-Solent on England's south coast. "I question
the trustworthiness of paper money," he says. "A $20
bill has devalued something like 97 per cent in the last
60 years."
Aitken added another large gold bar to his collection a
few weeks ago. "I buy only bars, no coins," he says.
"Gold is a big part of our future retirement plans." Of
his total assets, 50 per cent is gold - about one-third
gold he can hold and two-thirds gold stocks.
Adam Hamilton, an investment consultant in Beach,
North Dakota, has been buying gold since the 1980s
and feels a bit vindicated by the recent revival. "The
name 'gold bug' can be viewed as derogatory," he
says. "For years if you said you invested in gold, you
were looked down upon by the equity investors. And
now the equity investors want to buy gold."
Still, there are drawbacks, even for fans. For one, gold
bars are difficult to transfer and trade. "If I buy a
gold
bar on the Internet and have it shipped to North Dakota
the costs will be expensive," Hamilton says.
Storage is another challenge. "People do all sorts of
things with their gold bars - put it in the bank or even
under the mattress," says Sandra Ferguson, a bullion
manager at ATS Bullion in London.
At Baird, the London gold refinery, buyers can take
their bars home or leave them in the company's
gold-bar secure storage service for about €470 a year.
Baird says the company has "security like Fort Knox".
Sales are by appointment only and take place in an
office in front of a bulletproof glass though which
clients can watch the manufacturing process. The gold
for the bars is melted down from a wide range of
sources, including scrap from broken jewellery and
even gold fillings from teeth.
Dow Jones
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