15 Years of Safe Custody, 15 Years of Precious Metals

This year marked the 15 years in safe custody for Guardian Vaults. As the first of its kind to open in Australia, Guardian quickly established itself as the industry standard in providing safe deposit boxes and secure; fully allocated bullion storage solutions. The celebrations culminated in a red-carpet event held at the state of the art Castlereagh Street facility in Sydney attended by industry luminaries and friends of Guardian.

As well as being a time of celebration for Guardian Vaults, this milestone also provides us at Guardian Gold with an opportunity to reflect on the importance of holding gold and silver over this period. From the world changing seismic shift that was the Global Financial Crisis, to the daily installments of the Trump Show; the last 15 years have been witness to considerable market volatility and geopolitical uncertainty.

The following charts show the cumulative and average annual returns for an investment in AUD gold and silver assuming a holding between Nov ‘02 to Nov ’17

Why continue to own gold and silver in your portfolio?

Historically, precious metals have performed well in these challenging environments. Price is intrinsically linked to the ongoing confidence (or lack thereof) in the health of the economy and the actions of the governing entities. When these belief systems are tested we consistently witness a retreat into gold and silver as the global safe-haven and preeminent store of value.

Many share the belief that we are yet to fully face the consequences of those decisions that led to the GFC. The resulting global response to the crisis of fiscal bailouts and unprecedented debt creation has set-up the real possibility for future instability.

The form a response to any future crises may take is unknown. The policy of ‘printing your way out’ and interest rate cuts would have limited effect, if not already exhausted. Couple any emerging crisis with multiple over-inflated asset classes (seen across the board as a result of free money) and the outcome could be a paradigm shifting correction. Gold again would reprice to meet the market just like we saw in 2008-2013.

Even 9 years after the height of the crisis AUD gold is only 9% off its August 2011 highs of $1,830 (32% in USD terms), making it incredibly well positioned to respond to future volatility.
Industrial fabrication using silver makes up about 50% of demand each year, as opposed to roughly 10% for gold. This means price correlation between the two metals can vary significantly dependent on the health of the industrial sector.

Unrivaled as the most efficient conductor of electricity, silvers use in the circuitry of all your favorite gadgets and the solar panels of the clean energy revolution has seen strong growth in recent years. The demand for these technologies from emerging markets like China and India is expected to continue to increase with the growing appetites of the burgeoning middle classes.

It’s always healthy to take stock and reaffirm your reason for investing regardless of the asset class. Gold and silver are unique in that they don’t generate an income stream and have little to no correlation to other traditional assets. They are a hedge against a paper world of unforeseen events, a way to secure a portion of your wealth as a form of downside protection; this remains as true today as it was 15 years ago.

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