Issue 20.5, Auckland, 28 December 2020
Warren Buffett is often quoted as calling gold a “barbarous relic”. While this is a misquote, it was actually John Maynard Keynes talking about the early 20th-century gold standard, Buffet is certainly no fan of gold.
Buffet actually said this about gold:
“[Gold] “gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
His opposition to gold is well known and often repeated by people who would prefer you to only buy stocks, bonds and other “productive” assets. So when Buffett made a major investment in Barrett Gold, a gold mining company, it raised eyebrows.
But was this really in opposition to his previous stance? Or does he believe a gold mining company to be a productive asset in the near future due to the rising price of gold?
This certainly looks to be the case. Gold is up over US$300 for 2020 and is staying high on inflationary concerns. As this was being written, the US Congress just passed a US$2 trillion spending bill… and Trump kicked it back to increase direct payouts to every single eligible American.
Jerome Powell, the chair of the US Federal Reserve, said the Fed Committee “will aim to achieve inflation moderately above 2 percent for some time.”
The US is not alone. Governments in the EU, China, and elsewhere are on spending sprees as their central banks aggressively target inflation. Ultimately, this creates a strong bull case for gold and other precious metals.
In one major way, Buffett is correct. When most people buy gold, it is not an integrated part of their investment portfolio. As he says: “It has no utility”. Gold is a great insurance policy against inflation, but the best insurance policies can often be leveraged as a financial asset as well.
Can we really “utilize” gold?
LEVERAGING THE BARBAROUS RELIC LIKE A CENTRAL BANKER
Absolutely. When we decided to add gold and precious metals as an asset class, we did not want to simply help clients buy gold and just “bury it again”.
Precious metals are top tier collateral; just ask all these central banks who keep buying gold to strengthen their balance sheets. As such, we want to help clients use their gold to tap lending when needed and use it as collateral for major financial transactions.
It is worth noting at this point that Obris by Crown Private is an affiliate of Crown Financial Services Limited (CFS), a registered financial services provider based in New Zealand.
Many of our investment clients do not know that CFS has a substantial lending operation. We have originated millions of dollars of loans in the past six years, and this continues to grow.
With the launch of Crown Gold, we help our accredited clients buy, store, manage, and sell precious metals. We also provide lending to them against the metals stored with approved custodians.
Our comprehensive metals solution is extremely efficient to turn assets into utility. As we already have the client’s information and know the status of the collateral, we can turn requests around for our clients quickly and efficiently.
We partner with vaults in Australia and Panama to provide storage and purchasing options for our clients. Metals that are stored at these vault partners are eligible to be used as collateral for lending.
To further demonstrate our commitment to the gold market, we decided to partner with one of the largest government-backed vaults and refiners in the world. As of September 2020, we were fully vetted by The Perth Mint and accepted into their Depository Partner Program.
We are one of only 12 financial institutions in the world accepted into this program. This allows us to buy and sell unallocated and pooled precious metals on behalf of our clients. It also gives us the ability to store fully refined allocated metals at The Perth Mint.
Think about your portfolio. To what extent are you burying barbarous relics? What aspects of your portfolio are being fully utilized? It is certainly time to assess the role that gold and other precious metals hold for you.
If you are an accredited investor, we would be glad to assist you with expanding your precious metals allocations and to leverage these metals to further enhance your portfolio. Click here to view the Crown Gold website.
Kyle on behalf of the Obris Team
Kyle Gonzales is a long standing Obris member and an accomplished investor. He joined our team earlier this year as our business development director. If you are interested to learn more about Crown Gold, please contact us through the Obris website.
Crown Private Limited is an affiliate of Crown Financial Services Limited. We provide wealth management and private banking services for high-net-worth individuals and family offices around the world. Obris is our global investor syndicate that caters to accomplished and adventurous investors and entrepreneurs.