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Estate Planning, Wealth Preservation With Precious Metals 

Joshua Rotbart, 11 August 2020

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The author of this article presses the case for precious metals when used in estate planning and wealth preservation. Recent moves in the gold price certainly add fresh edge to the argument.

Precious metals such as gold play an important role in protecting wealth, and the case for gold, for example, has been given fresh impetus by its price rise of over $2,000 per ounce in recent days. Gold remains an important wealth management and private banking asset. 

To discuss these issues is Joshua Rotbart, of his eponymous firm J Rotbart & Co. In March, the boutique firm unveiled a partnership with Blockpass, a blockchain-driven KYC-as-a-service platform business. J Rotbart & Co works with clients in Singapore and Hong Kong to sell, buy, store and ship precious metals. 

The editors are grateful for these insights; the usual editorial disclaimers apply about the views of external contributors. To jump into the conversation, email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

Precious metals, especially gold, have maintained their standing as symbols of prosperity and wealth throughout human history. As limited resources that must be mined and extracted, their scarcity adds to their value.

This value has grown steadily over time, often outpacing other investments such as stocks and fiat currencies. Precious metals have withstood historic cataclysms, protecting their owners’ wealth through economic turmoil since the dawn of civilization, and have allowed them to pass on their fortune to their heirs for generations.

Physical precious metals, such as gold bullion bars and coins, continue to be a prudent and reliable safe haven for wealth preservation and should be seriously considered during estate planning. 

Precious metals preserve wealth
While many people believe that fiat currencies are only worth the paper they are printed on, precious metals have always been held in high esteem. History has stood by precious metals as a store of value and tangible assets that are easily transferable and liquidated.

Gold and silver were used as currency for thousands of years, long before countries established their own fiat currencies. Even then, and all the way to the 20th century, they valued their fiat currencies based on a gold standard, meaning that fiat currencies were pegged directly to gold. Today, government central banks are still procuring gold (1), to have a larger degree of financial freedom and to bolster their fiat currencies, further confirming gold’s status in wealth preservation.

Gold withstands economic turmoil
As of this publication, economies around the world are reeling from the effects of COVID-19. But as fiat currencies and stock markets are plunging and wildly fluctuating, gold has held strong (2), even soaring in value. During turbulent times such as these, investors realise the benefits of precious metals such as gold. There are no counterparties (3) to contend with, nor are there regulatory limitations or obstacles hindering purchases, trades or sales, which is what may face holders of ETFs, or “paper gold”, and other financial instruments such as shares.

Gold is proving itself once again as a great hedge against market downturns as physical gold is a stable and relatively risk free asset. Investors turn to physical gold in times of distress as it is not issued by a single authority and cannot go into default. Gold is a tangible asset owned fully and directly by its holders.

Gold has been a trusted asset against financial meltdowns through the course of history (great examples can be seen during the 2001 and 2008 financial crisis), as investors turn to gold to hedge their risks.

Gold ETFs and ’paper gold‘ are as good as the company that issued them, meaning that, if the issuing company goes into default or goes bankrupt, it is likely that the investors will not be able to be fully compensated based for their “paper” holdings. 

Economic policies can affect gold prices
In addition to unpredictable or collapsing markets, governments are stepping in to help by implementing quantitative easing (QE). QE is a policy whereby a central bank injects more money into circulation on order to increase money supply and investments in the markets through such actions as buying government bonds. The idea is that, with low interest rates and more money available, banks will lend more, and businesses will continue to operate. Unfortunately, QE can lead to inflation and money losing its value when more and more of it is being printed. This often negatively impacts most investment instruments except for gold, as its value tends to increase with inflation (4).

Precious metals should be part of every investor’s legacy 
Experts (5) highly recommend diversifying wealth portfolios with precious metals. Investors want their investments to at least maintain its value, but they prefer to see these nest eggs grow over time.

Precious metals such as gold are not only an excellent hedge against market downturns, but analysts time and time again see gold as a sensible, if not profitable, asset class for the future (6). Gold is a great diversifier to one’s portfolio as it combines minimum risk with long-term price appreciation. If the economy is doing well, gold is purchased in the form of jewellery and investment for the future. If the economy is doing badly, gold usually acts as a balancer to the investment portfolio.

Physical gold bullion, whether in coins or bars, is a tangible commodity that does require planning and forethought when purchasing. They are valuable assets and vital for protecting your wealth and your family’s future, so you want to ensure that it is bought, stored, and allocated securely and done so in a professional manner with a reputable company.

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