The cultural and sentimental value of gold means steady demand. The pandemic makes online auctions a convenient and safe alternative to buying gold."
I was in the Emirates Lounge in Dubai. During a layover from Prague I had collected an edition of Fortune magazine before I sat down on an armchair. I looked down as throngs of travellers walked between airline gates. As I flipped through Fortune magazine, I stopped at an article by Warren Buffet. The legendary investor penned a piece on gold in his 2011 letter to the shareholders of Berkshire Hathaway Inc (NYSE:BRKB).
In that now famous letter Buffett said, ‘Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.’
Hardly a ringing endorsement of the precious metal.
But this was back in 2011. Gold had peaked at a fresh record high above $1,900 an ounce. Warren Buffett remained circumspect at the price rise. He cautioned, ‘A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be.’
‘The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.’ To say that Buffett was not a fan of gold was an understatement. Gold never produces income and it was only worth what other people are willing to pay.
Beyond investment returns
Fear or no fear of market turmoil, gold has maintained its emotional, cultural and financial value over millennia. Investing in gold is more than a bulwark against financial market upheaval. You don’t need to look far to find gold as part of life.
In the Middle East I saw first hand people's love for gold. Over there, newborn girls receive delicate gold bracelets bearing their names. Brides receive a dowry of earrings, a bracelet or a necklace from the groom and his family. Her gold represents security, saved for hard times like divorce or death.
Demand for gold is being supercharged by India’s growing affluence. Indian culture prizes gold. Gold is considered a store of value, and unequalled as a symbol of wealth and status. Hindu and Jain cultures consider gold to be auspicious. From marriages to religious celebrations throughout the Indian calendar, celebrating with gold is the norm. 50 percent of annual gold demand in India is from weddings alone.
A cultural affinity for gold also runs deep in Chinese culture. Tradition dictates giving gold to new born babies as tiny necklaces or bracelets. Brides are adorned with oversized 24-karat pig necklaces. People purchase 24-carat gold jewellery featuring zodiac symbols during Lunar New Year. Like India, China’s appetite for gold is one of the world’s largest and fastest growing markets. People buy gold jewellery for investment for their striking beauty.
Buffett’s 2020 about face on gold as an investment
Buffett has tended to focus on the poor investment prospects of the precious metal. He turned a blind eye to the cultural and emotional aspects of gold. Yet in August 2020, Buffett finally said what he would never do - but he didn’t quite buy gold. Instead Berkshire Hathaway bought into gold miner Barrick Gold (ABX, as it is known in Toronto, or GOLD, on the New York exchange). It was suspected Barrick Gold’s strong fundamentals and growth potential drove the purchase. The huge price rise in gold would certainly increase Barrick Gold's profits.
Gold jewellery is accessible and tradable
If buying shares in gold miners isn’t your thing, then gold jewellery is an easy and convenient way to buy. In the 2008 recession, gold parties were all the rage. Over a glass of champagne women across the UK held gold parties, had their gold valued and paid out in cheques.
Following the financial collapse, the pandemic and the port explosion women in Beirut have traded their gold for cash. COVID-19 has people relying on gold to support their livelihoods all across the Middle East.
Gold jewellery can be bought safely and conveniently
The cultural and sentimental value of gold means steady demand. The pandemic makes online auctions a convenient and safe alternative to buying gold.
Online auctions for necklaces like this or bracelets need little effort to buy. Online auctions can give you a better range for items in a themed category. In some cases you can even find 24-carat rings that offer a low-cost entry point for gold investment. A good auction site will also offer information that you need to know about the piece in advance, allowing you to research prices from home. Some sites allow you to inspect certain items in person before bidding.
Auctions mean you can find deals that are sold at their market value instead of their retail price. People bidding know what each item is worth. For 24-carat gold jewellery it should in theory, sell for the prevailing market value of gold. Sometimes online auctions will authenticate pieces before listing.
For an investment literally worth its weight in gold, buying gold jewellery for investment or as a gift is always worth considering.
For gold jewellery auctions visit allbids.com.au