Matthew Parris

Why I won’t be selling my gold or silver

20 April 2013

It must be a couple of years since, spooked by the banking crisis and walking past the Savoy hotel on the Strand, I remembered a clever but impetuous Polish friend’s advice to buy bullion — silver or gold — and his mention that there was a respectable dealer in the Savoy arcade. And as I walked I had found my feet all but drawn by some mysterious, irrational force into the arcade. I had struggled home with an implausibly heavy briefcase. The bullion-buying phase of my life, phase one, had begun. I made arrangements for secure storage with a bank, and cancelled further payments into my pension plan.

I wrote about that day for the Times. I have not written about it since. Readers who post comments online sometimes ask how my investments are doing; some sneer; some seem envious; others are curious.

And my answer? I have entered phase two. Which is lucky. In phase one I should have found recent plummeting gold prices hard to take.

Phase one was characterised by a suspicion that I knew to be exaggerated but which nagged me nevertheless: that the global economy might crash again; that the price of gold and silver would soar; and that I should make big speculative gains on my purchases. This, I suppose, was the casino phase of my bullion-buying spree: quite short-term and desirous of a large, one-off gain.

It never occurred. Silver did rise, then fell back a bit, but remains more valuable than when I bought mine. But my notional gains are modest. Gold rose quite a lot, then fell right back and has been falling as I write. I’m certainly nursing a loss on my Britannia coins. Had I put the savings in my Northern Rock (now Virgin Money) account, I should have done a good deal better. But my holdings are modest and the sums are not significant.

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For the first six months or so after my visits to the bullion dealer I would study movements in the price of silver and gold almost every day, using a site (one of many) that records these, called Kitco. Sneaking my Kitco moment before bed and rising the next morning, I began to feel a bit like a 21st-century equivalent of George Eliot’s Silas Marner, counting his gold in his hovel. It was rather shaming.

Then, somewhat to my relief, I became bored with this degrading habit. Prices went up then down then up, and it struck me that as I did not need or plan to sell, it was a waste of time to follow fluctuations day by day; and I drifted away from Kitco, until the stage was reached when I could (and can, now) go for weeks or even months at a time without thinking about the price of bullion.

Yet I’ve bought more, and have not the least intention of selling. This, despite the fact that I now entertain no expectations of making a speculate killing. I don’t count or calculate any more. I just like to think of my hoard in its vault somewhere, and know it’s always — as it were — there for me; and that from time to time I shall add to it if I can. When the price goes up, I don’t think ‘maybe I should sell’; and when it goes down I don’t reproach myself for having bought.

This, then, is phase two; and it feels stable and looks like persisting. People and institutions buy land on a similar basis, as part of a long-term economic philosophy. If, then, a gambler’s hopes of a speculative killing characterised phase one, what human psychology drives phase two?

I’ve been giving thought to this since looking at a news story claiming that sales of silver bullion coins are headed for a record high. Yes, the sale of ‘American Eagle’ silver bullion coins soared last month, and sales have been breaking records for the past five years. The US Mint has twice recently been forced to suspend sales as demand for silver surged. Since 2000, US investors have purchased some $7 billion’s worth in silver, based on its current price.

But what that report does not tell you is that the value of silver has actually been falling over much of the period when the volume of sales has been increasing. It does not, therefore, appear that buyers are for the most part driven by speculative fever. They are buying into a commodity while its price is falling as well as while it is rising. We do the same with potatoes, or petrol. If one didn’t know that there is nothing one can do with a pile of silver coins except store it or count it, one would conclude that, as with petrol or potatoes, people are buying silver because they have a use for it, regardless of its value.

So small investors in America seem to be, like me, in phase two of the bullion-buying habit. They just want to have it. Why?

I suspect the reason is this. The immediate panic that followed 2008 has passed. People are no longer switching on the news every morning to find out whether the global economy (and with it their world) has ended. Nor do they expect other people to believe this, sparking a hysteria that could make the fortunes of those with bullion. They think that, on balance, next year will be rather like this year; as will the one after that. No great urgency attaches to personal financial decisions.

But in the back of our minds lurks the possibility that, sooner or later and quite possibly later rather than sooner, paper currencies will lose a lot of their value: not perhaps overnight, but steadily, as governments keep interest rates (and returns on savings) low, and print more money to shrink their debts and get growth started; and inflation eats into savings. So (unconsciously) we are now looking at the middle-to-long-term benefits of owning bullion, and taking out a modest insurance policy on the possibility that our more conventional savings may be whittled away by politicians.

No apocalypse, then — or probably not. Just a gradual, bearable, steady impoverishment in a world where savings linked to the value of paper money languish. A long-stop based on mild, long-term, chronic and half-conscious pessimism: a plan-B pension that the politicians can’t touch.

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Show comments
  • Christian Black

    This is quite right. Every time gold drops you get smartarse investment commentators mocking gold as a primitive miser’s assest with no dividends and no connection to the dynamic worlds of business and banking. They are quite right on a thirty year perspective, but on a lifetime or three generation perspective they should realise that their securities, currencies and central banks will be burned to the ground at least once.

  • Eddie

    The world economy is a basket case; the Euro only survives and limps on because of German subsidy; the banks are bust; the housing market one blip from a crash (and propped up by foreign cash).
    So why sell gold and silver? It has not reached its 1980 level in real terms, and the present world economy is far more fuggered up!
    Hold everything!

  • Gixxerboy

    Well said, Matthew. I think you have articulated some good insights. Happily, I had seen a lot of the problems you describe some time ago. Which is why I no longer live in the EU, have no Financial Services Products, stopped contributing to my pension plan (and will soon transfer it overseas, then into cash deposits) and am sufficiently wealthy.

    The problems, in brief, are these:

    1. The EU is a basket case, whether you are in the Euro or not. Its overbearing regulation is a barrier to investment and growth. Absurd, extremist policies over climate change typify (and are a large part of) the problem: economies grow fast when they have cheap and abundant (and reliable) energy. Climate change policies across the EU are, by design, making energy scarce and expensive. They are also making it unreliable. So, if I want to invest in a new plant as part of my business growth, the last place on earth I’d consider is the EU. Except, perhaps, California and similarly loony States.

    The EU is not going to succeed at all in its current form. Until it is broken up or reverts to a FTA area–rather than a regulatory superstate–it’s dead duck. You in Britain are lashed to it, so you can’t do much except hang onto your currency and hope for the best. The future is not bright.

    In much of the rest of the world, the future is a lot brighter. Okay, our currencies might be extremely strong, acting as a handbrake on exports, but that is the way the market works. Still, we’re not doing too bad, with low unemployment, low inflation, returns on savings that are modestly above inflation and anything we purchase from the rest of the world is cheap as chips.

    2. Financial Services. I learned from experience that financial services products and plans are extremely good at making money. For financial services providers. Their fees, margins and charges always get paid. If your nest egg grows at all, it is only after the FSP has taken their cosy, risk-free profit. It a mug’s game, especially with…

    3. Government expropriation. Never, ever put your money into any Government-induced scheme. Because then the Government feels no compunction about forcing you to do what they want with your money. Or even taking it away from you. (Of course the sinister moves in Cyprus show that even money on deposit is not free from Government theft, but it is much harder to justify.) In the UK, for example, even after all those years saving your money is not yours to do what you want with. You can have a small amount of it and you are forced to buy an ‘Annuity’ with the rest. A Financial Services Product. Oh joy! And guess what? The annual amount you’ll receive will be about a third of what you’d get if you had the money in a deposit account at a rock-solid New Zealand or Australian bank. Oh, and you’ve handed your money over – gone! Whereas in the bank, you keep your money.

    Gold or Silver really do make sense as a medium- to long-term investment. I’m still considering metals as part of my investment portfolio but in my circumstances and where I live it’s not such a priority. I make good returns at the bank, have some modest (direct) shareholdings, a handful of mortgage-free properties in different countries and would rather spend the money on enjoying myself: carpe diem.

    I’m afraid, Matthew, all of you left in the UK or other parts of the EU are royally screwed. And what guarantees it is the whining, hand-wringing, fearful attitude of the populace. Hardly anyone has the wits or the guts to so much as vote for change, never mind do something about it.

    Welcome to the future, Britain. Just remember you created it.

  • Terence Hale

    Why I won’t be selling my gold or silver. The pressure on gold is a direct consequence of austerity. A good example being Cyprus which is forced to sell “The family Jewels”. The uncoordinated sale of gold is a danger to world economy.


    Good points I remember when the crash happened in 2008 it may people think more about what is real and what isn’t real and things that will always have value.

  • Gwaillor

    So not following the example of that great big financial brain, Gordon “No return to boom and bust” Brown, who sold off half the UK’s bullion reserves when gold was at its lowest price for 20 years? That monumental blunder cost the country about $15 billion. That’s what happens when you have a chancellor who spent ten years asleep at his desk in the Treasury, dreaming no doubt of one day becoming PM so he could inflict even more damage on the country.

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