Who buys bullion?

Think of individuals who own gold bullion and images of James Bond’s arch enemy Auric Goldfinger may come to mind, or real-life billionaires who live in a world of superyachts and private Islands. It’s a common misconception that only high net worth individuals can own it. The truth is very different, and you don’t have to look far for proof. Ed Pearce, Managing Director of Douglas-based gold bullion depository and trading company IMGold, explains that the typical bullion owner today is far removed from the stereotypical image.

When Sean Connery starred in Goldfinger in 1964 his hand-made suit was worth about the same as one ounce of gold. Any man who in 2013 wants to match 007 in the style stakes will find that a suit of equal quality costs about the same as that ounce of gold does today. The relative value of gold bullion has held firm through the last three decades or so weathering economic recessions and political crises. But the opportunities to own bullion have increased, as has the profile of the typical owner.

At IMGold our customers are as likely to walk in wearing a jeans and a t-shirt as they in designer labels and expensive jewellery. In many ways the recent history of the gold bullion market is a reflection of changing attitudes towards banks, property ownership and currencies. As faith in the institutions which safeguard these forms of wealth has diminished, there has been a growing interest in buying gold and other precious metals as part of a strategy to protect private wealth.

Businesses such as IMGold have been founded to meet this demand and to make the buying, selling and storage of gold and precious metals as simple and straightforward as possible. In short, it’s never been easier to own bullion, and the simplification of the purchasing and ownership of precious metals has opened it up to individuals from a wide range of backgrounds. Yes, we have high net worth and ultra-high net worth clients – but our customers just as likely to include the retired self-employed tradesman, small business owner, or the couple looking to protect a relatively modest inheritance to pass on to their children or grandchildren.

What is the attraction of owning gold bullion? Gold has been a form of wealth protection for centuries and its history shows a pattern of increasing interest in ownership during turbulent economic periods. Bullion has a perennial appeal in that it is a form of wealth which is tangible, a solid asset as opposed to wealth represented by a share certificate or a series of numbers on a bank statement. Given the examples of the 2008 global banking crisis, and the collapse of national economies such as Greece, it’s no surprise that many of us now question once universally accepted truths about wealth protection. Gold is, and always will be, a rare commodity. Thomson Reuters GFMS, a leading organisation in precious and industrial metals markets research, estimates that all the gold in the world which has so far been mined amounts to 171,300 tonnes. Make that into a cube and it would measure around 21metres on each side and fit comfortably into the Centre Court at Wimbledon.

Cosmologists at the Harvard-Smithsonian Centre for Astrophysics (CfA) believe that while elements such as carbon and iron were created within many billions of stars, gold is formed as a by-product of two neutron stars colliding. Such a collision produces heavy metals before the stars collapse to form a black hole. The rarity of such a cosmic event explains the rarity of gold in comparison to other elements – so there’s no likelihood of anyone discovering significant new sources in the foreseeable future. But the global demand for gold continues to grow. Scientists keep on developing new uses for it in technology and medicine in everything from microchips, to drugs for treating arthritis, and surgeons using it in heart surgery.

It’s more than 5,000 years since the Egyptians found a way to separate gold from ore. At that time gold was considered to be the skin or flesh of the gods, and only kings were allowed to wear or own it. Now it is possible for individuals from a wide cross-section of society to buy and own the precious metal. Owning gold as part of a strategy to protect private wealth is a phenomenon as ancient as human civilisation. What is changing is the relative wealth of those who can choose to own it.