“Gold is Gold! That’s all you need to care about!” Is that really the case?

“Gold is Gold! Who cares about the brand, as long as its Gold, you can definitely sell it off! Don’t need to worry!”

 

Have you heard of that statement before when you purchase Gold? Perhaps a family member with good intentions was just sharing with you his/her thoughts, or a savvy sales person was pushing a seemingly cheaper product. We at GoldSilver Central have definitely heard of that before and even more so in 2020.

 

Why? Because, In 2020, Gold prices have increased by 36% since the opening price, brightening the spotlight shining upon the yellow metal. Many investors who previously bought physical gold during the last peak in 2011 have stepped forward, eager to finally sell off their holdings, having seen a dismal 8 years of decline in their precious metals portfolio. Some of them, glad to offload the metal at their initial purchase price, never mind the fact that they have lost 9 years worth of interest/opportunity costs along the way.

 

New investors on the other hand are also searching for alternative investments, with the slowdown in economy, departure from traditional assets such as shares and bonds, and also the generally dismal interest rate worldwide, as a general financial environment. The 36% increase in Gold Prices YTD 2020 , translates to 48% annualized returns, and this is assuming Gold prices remain at current levels instead of rising upwards, lending strength to investing in Gold.

 

What this means is that interest in the Physical Gold market is being revitalized, as more demand, together with more aboveground supply flows back into the market. With this interest comes more “varieties” of physical gold, notably non-LBMA Bars and Coins.

 

Refer to this link to find out more about LBMA

https://www.goldsilvercentral.com.sg/blog/what-is-lbma-and-why-is-it-important/

 

 

Why do People purchase Non-LBMA Gold?

To be fair, people purchase non-LBMA Gold such as bars or coins for various reasons. They trust the seller to a certain extent or that they believe gold is gold and that its liquid everywhere. For example a popular local jewellery shop could be minting gold bars for local retail consumption. After all, its highly popular in the local populace, everyone would recognize it anyway. Or the gold coin being retailed could be a special limited edition item with a popular design, don’t miss out on getting it now while stocks last! It doesn’t matter who mints the coin, private mint or sovereign mint, Gold is Gold after all right?

 

People could also purchase non-LBMA Gold because the price discount offered is way below the general market price and it’s a “great bargain”.  In some cases even, they know that it is a “ticking time bomb” as there are schemes that guarantee a monthly return from the non-LBMA Gold they purchased but they believe that they can “exit” before they get burnt.

 

Either way, it does not necessarily always work out well.

 

Not all Gold is liquid

In the past few months, articles linking international refineries to allegations of tainted gold sourcing have surfaced. These refineries have long standing histories and have been esteemed players in the industry. In recent times, there have been increased scrutiny on refineries, as consumers of Gold are demanding to know that their purchases are ethically sourced. Refineries have thus become more strict on the above ground gold that they buy back from distributors.

 

Closer to home, a refinery that regularly purchases gold from dealers/consolidators in the region published a notice stating that it would not accept certain types of bars. As a general background, such broadcast lists are quite common and do not usually differ much. Interestingly, the brand “Genneva” is included also in this round’s broadcast. (If you are unfamiliar with Genneva, click here to read more about it.)

 

For those who previously bought Genneva branded Gold, you know that throughout the years, you may sell it and it is recognized as “Scrap Gold”, meaning you would have a higher discount on it but you still would be able to offload it. However, now with its inclusion into the Non-Approved Gold list by the refinery, metals dealers may not even wish to accept the bars, no matter the discount as they have an increased probability of being unable to sell it off. No respectable dealer operates their business this way and holds ticking time bombs in their inventory. It does not make financial sense.

 

Suddenly, we have this situation where Genneva Gold that was once accepted as “Gold” but now is no longer seen as “Acceptable Gold”. Overnight, your Gold is no longer acceptable “Gold”. (Bear in mind your Genneva Gold still has a purity of .9999 and its weight did not decrease one bit.) But now, your Gold asset is worth nothing, seeing that you can’t get a price quotation on it. I would postulate that this risk of not being able to exit your investments is too large for a savvy investor.

 

So if you are holding on to non-LBMA Gold currently, set up an appointment with us to explore your options. We’re not saying you need to sell off all your Gold as quickly as possible, but at least you will know all your options then.

 

So that’s it. A quick look into whether “Gold is really just Gold”. Stay tuned for more updates.

 

Articles on Allegations of Tainted Gold Sources

https://www.ft.com/content/4c569519-a3f2-48a7-a267-a639c450ec42

https://www.swissinfo.ch/eng/valcambi-refinery-denies-sourcing–dirty–gold-from-dubai/46019668

Jason