THE movement of a large quantity of gold bullion from London to Dublin following the opening of GoldCore vaults earlier this year reflects a growing demand from investors to relocate tangible assets out of the UK. The first consignment consisted of gold bullion coins and bars weighing 2,000 troy ounces and worth more than €2 million.
“Brexit is a threat to the UK, to Ireland and the entire EU project, it is a phenomenon that has ramifications for the entire 27 countries in the EU and its citizens,” says Stephen Flood, CEO of Goldcore. “With the rise of both left-wing and right-wing political movements, people are railing against the impact of globalisation including mobile workforces, corporatism and rising inequalities.
“Ireland’s open economy means that we are more exposed than most to Brexit and threats posed to the EU, and while much air-time has been devoted to how businesses need to take stock and prepare, less has been said about what individuals can and should do to protect themselves and their assets. Everyone needs to be aware of the risks that lie ahead and, as such, be prudent by taking steps to reduce exposures in the event of a negative outcome,” he adds.
As Brexit comes to a head, GoldCore report a growing preference amongst Irish investors to store their gold domestically in Ireland rather than Perth, Zurich, Singapore, Hong Kong, Singapore and especially London. While Zurich continues to be the most sought-after storage location, Dublin has already surpassed Singapore and Hong Kong and may now usurp the second spot from London.
“In the event that Brexit is delayed or postponed, then demand for gold stored in Ireland may be more subdued and see a more gradual uptake. Other global threats and uncertainties around trade wars etc could see the demand ramp up further.”
Founded in Dublin in 2003, GoldCore has over 16,000 private, pension and corporate clients in over 150 countries, with over €150 million in precious metals under management. Bullion coins and bars are individually allocated and segregated, ensuring direct and outright asset ownership for clients.
The company began offering storage in the Perth Mint of Western Australia in 2005 and introduced GoldCore Secure Storage in 2009. Having since grown to include specialist vaults in Zurich, London, Singapore, Hong Kong and now Dublin through vault partners. Loomis International and Brinks, GoldCore is set to expand its storage offering to additional locations, including Dubai and New Zealand, in the near future. Prudence must be a watch-word undertaken in every household and every business to mitigate the potential worst impacts of Brexit, Flood believes.
“The Irish Government have adopted a purely pro-European tactical position which infers that we must have trust in the European authorities to keep as sacrosanct our interests. This is a fallacy, as De Gaulle said: ‘nations have no friends, only interests.’ We note that in a recent German opinion poll, Brexit barely registered as a concern among the public — there is something in this. For Irish people the time has come to take a cold hard look at the reality of the situation.”
In the midst of the continual focus on Brexit in Ireland and the UK, the potentially larger threat of a so called ‘ItalExit’ and the possible departure of Italy from the EU and the European monetary union presents an even graver prospect, Flood believes.
“Italy is in political crisis, and anti-EU politicians of the left and right have been put in power by an increasingly disgruntled Italian electorate. But the risk is not simply from people power and radical politicians, there is also the real risk of another Italian debt crisis, centred on very heavily indebted Italians banks and an indebted sovereign.”
Italy’s sovereign debt is €2.3 trillion, much of which is owned by Italian banks, the highest EU debt-to-GDP ratio after Greece.
“There are concerns that Italy will have a new debt crisis which could see a default and potentially an exit from the EU and the euro,” he said. “Banks in France, Germany and Belgium are most at risk of contagion from Italy’s debt crisis. French banks are the most exposed to a sell-off in Italian bonds with €285.5billion in credit extended by French banks.”
Flood takes a contra view to the idea that a cashless society would eliminate gold from use and hence be less valued as a store of value.
“A cashless society, while it boasts many benefits, also exposes people to greater cyber risks as digital assets, like deposits, are exposed to hacking, cyber terror and war. So, as with all investments, we should diversify and not hold all our eggs in one cashless basket, or indeed on one digital or paper basket.”
He cites the opinion of Ken Rogoff — the former chief economist at the International Monetary Fund — that gold’s role is likely to increase as cash will be used less and “the trend towards digital currencies” will also benefit gold which “as a hedge, has enormous value.”
While gold has become less popular in recent years as the Irish and global economy recovered and stock and property markets surged in value, investors concerned about Brexit, trade wars and other global risks have continued to diversify into the precious metal.
“History and recent history and indeed academic and independent research has shown that gold is a hedge and a safe haven. Today, the biggest gold buyers in the world are the largest central banks, including the People’s Bank of China. There are increasing concerns about the medium and long-term outlook for the dollar and, in time, its status as the world’s reserve currency will come to an end.”
Looking to the future, Flood sees gold back near $2,000 an ounce within the next 24 months as a more than likely scenario.
“We would be surprised if gold does not surpass $2,000. Much higher levels are likely in the longer term, and in a currency reset scenario or new Bretton Woods style monetary agreement, it could go to over $5,000. As ever, exactly predicting the future price of any asset is a fool’s errand.”