Gold: an abnormal holding for abnormal times

The great and good of Edinburgh always turn up at events if they know Robin Angus, the executive director of the Personal Assets Trust (PAT), is going to speak. And quite right too: he is exceptionally good. Last week, he spoke at an investment conference and while he made his audience semi-hysterical with giggles by announcing that he believes the next bull market in equities will start “the day the first tram runs in Edinburgh,” he didn’t have much good to say. Instead, he noted that the current economic situation is “diabolical” and that for the first time in generations, “our children could be worse off than us.”

He mocked the world’s finance ministers. They are, he said, totally out of their depth: “gabbling and sweating like unsuccessful applicants on The Apprentice.” That said, he still said he expected a political solution of some kind – if not a lasting one. “When politics and economics disagree, politics always wins but economics then takes its revenge.”

So, how do we invest in such a climate? With great difficulty, says Robin. Back in the 1980s and 1990s it was a pretty straightforward business: everything did pretty well, so all fund managers had to do was pick stocks that might do better than others. These days, if you want absolute returns, you need to have “specialist knowledge” and be in specialist sectors.

You also need to be in gold. Objectively speaking, he said “gold is a shockingly bad investment.” You can’t eat it, it doesn’t pay interest and it costs you money to store. However, it does have major advantages in this kind of environment. You can “always use it to pay your way, anywhere, anytime”. And in the kind of “race to debase” we are living through it is surely worth holding a currency that no one can debase.

And for those who think gold is in a bubble he says this: now, only 0.6% of global financial assets are in gold. In 1980 that number was 3%. “Only those who don’t hold it and have never recommended it call gold a bubble.” Robin does not consider himself a gold bug. Instead he sees gold as an “abnormal holding for abnormal times”. It is simply a means to an end – that end being to protect capital and hold firepower for the day when the next global bull market begins.

Afterwards I caught up with Robin and asked him, the tram aside, when he thinks that might be. His answer? There is probably another five years in it, but the thing to watch for (and this is something that both John Stepek and I have said before) is real interest rates going positive. 

I interviewed Robin for the magazine last year so read more here on his views on the disaster that is our financial system. I’m also hoping to get Robin along to speak with me at an event in Edinburgh in early December – I suspect the next few weeks will bring no change to his views. But if they do, I’ll let you know.