by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
web sites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
Expat Investor : March April 2009
ALTERNATIVE INVESTMENTS Gold remains an expat’s best friend Mark O’Byrne, Executive Director of Gold and Silver Investments, puts forward the case against diamond and jewellery investment. Jewellery and rare stones are not investments. Some quality jewellery pieces and top quality very rare stones may retain their value in the event of a continuing and deep recession; however the vast majority of jewellery pieces and rare stones will fall in value. In the current financial and economic climate there are very few safe havens. Gold bullion remains one. In recent years, central bank gold sales and leasing of gold have artificially suppressed market prices. As financial institutions and central banks become more concerned about financial, economic and systemic contagion, this source of supply is set to dwindle. Already, many South American, Middle Eastern, Asian and Russian central banks have already stated their intentions to add to their gold reserves. The German Bundesbank As a result of the economic slowdown, jewellers are weathering the storm by touting their wares as a safe investment. Experts, however, have been critical of these claims. They warn that it is irresponsible to encourage investors to buy jewellery as an investment and may result in the loss of hard-earned savings. Jewellery and diamonds attract VAT at very high levels. Before being fashioned into bracelets and necklaces, investment grade gold bullion (0.9999 pure, or 24 carat) coins, bars and government gold certificates are stamp duty and VAT free. Jewellery is not. This is an added cost on top of an already large mark-up. Typically, nine carat, 14 carat and 22 carat rings, bracelets and necklaces have mark ups of 100% over the real value of their component precious metals. A very large necklace containing one ounce of pure gold (0.9999 pure, or 24 carat) will normally cost well in excess of 250% of the actual market price for gold. If gold is trading at £560/oz, this means the necklace will likely cost at least £2,000/oz plus the VAT. A gold bar which also has one ounce of pure gold (0.9999 pure, or 24 carat) will be sold at the trading price plus a small mark up of around 5%, or £588 (£560/oz+5%=£588) and no VAT. While these considerations start at purchase, there are also drawbacks when it comes to selling the jewellery bought as an investment. Unfortunately for the vendor, re- sale jewellery would not normally realise more than 30% of its original cost price. In fact, most jewellers do not consider buying back items they have sold, forcing the owner to seek a new buyer in pawnshops or online at sites such as Ebay. This massive instant depreciation is not seen in asset markets, including the gold market itself. A gold certificate, bullion coins or gold bars can be bought at 2% to 6% over the live market gold price. Days or years later, the same gold certificate can be sold automatically to a bullion broker or government mint at almost 100% of the market value. This can take place at around one per cent below the actual market price or slightly above the market price. This means that the spread between the buy and the sell price for investment grade gold bullion is marginal. In comparison, the spread between the buy and sell price for rare stones or jewellery is very high, making a positive return on investment extremely unlikely. Unlike diamonds and jewellery, gold bullion coins, bars and certificates can also be placed in a pension fund. There is no local or international jewellery or diamond market place where goods can be traded on a daily basis on an exchange. This lack of an efficient market or price discovery mechanism makes the price of jewellery and rare stones subjective and subject to the whims of individual jewellers and valuers. International experts don’t recognise jewellery or gemstones as investments exactly because they are not correlated with equity markets. Lisa Hubbard, Executive Director of International Jewellery at Sotheby’s, notes, “Diamonds tend to go up and down with the value of the stock market.” Unlike, jewellery and rare stones, investment grade gold bullion (0.9999 pure) displays an inverse correlation to property and equity markets. Online Brokerage for Offshore Investors ????????????????????????????????????????????????? ?????????????????????????????????????????????????? ????????????????????????????????? www.internaxx.lu Tel: (+352) 2603 2003 Your International Online Broker in Luxembourg Internaxx Bank S.A., 46a avenue J.-F. Kennedy, L-2958 Luxembourg, R.C. B 78729. Fast Facts 33002 6 EXPAT INVESTOR ? March/April 2009 expatinvestor.com recently explained how they view gold as an essential monetary asset. The Bundesbank is the world’s second-largest holder of gold after the US Federal Reserve, and has sold just 20 tonnes out of total reserves of over 3,000 tonnes in the past five years. “National gold reserves have a confidence and stability-building function for the single currency in a monetary union,” said a spokesperson. Financial and political uncertainty make their gold reserves more important than ever before. As ever, real wealth diversification and diversification in pension funds are absolutely essential to all investors, and best-of-breed equities, property, commodities, government bonds, cash and gold bullion should be included in all investors’ portfolios in order to protect ourselves in 2009. Gold and Silver Investments is a financial services company specialising in wealth preservation strategies. It provides asset diversification services to investors, companies and institutions in the EU and internationally.
January February 2009
May June 2009