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Monthly roundup - Gold vs. Property (Key stories from July 2017)

 

Dear Readers,

It feels like this last month has gone by so quickly. The summer school holidays began, which for many of us mean teenagers asking for more cash than you can shake a stick at and a constantly empty fridge.

This monthly update focuses on a subject which is critical and yet impossible to time as an exact science – the coming property market price correction. I call it a correction, not a crash because a crash implies a sudden awful surprise. But, in truth, when an asset’s value is as over-priced as the property market is now that price has to correct at some point. A property crash can ruin lives but, tragically, it is foreseeable.

This subject is in the DNA of this company. Back in 2007 our CEO Caroline Peers moved out of property as their main asset into physical Gold and Silver and founded Bleyer. Talk about timing! Many people believe the last recession began in 2008 but it didn’t. As we’ve often written, the signs were clearly there in 2007, within the U.S. sub-prime mortgage market. Watch 'The Big Short' for a very entertaining yet brilliant film on this subject.

 

 

Gold vs. Property:

Gold is a viable and sensible asset in which to park one’s wealth, as a property crash approaches. In fact, historically the Gold price is an oscillating price wave in the opposite direction to property, so the potential for great gains - as one market crashes and the other rises - are real and present.

A fall in property prices has been humming for quite some time, not just from the building industry and estate agents, but also by observing the obverse side of the financial market:

  • an increase in 100% mortgages (the hook that bates the public fish)
  • and the dip in interest rates (the other hook that bates the public fish).

 

 

Setting the Stage of a Property Price Correction:

Whenever a market starts shrinking, that market has to do more to goad people into it. Hence the above two signs. Rather than see these signs as an invitation to incur more debt, it is actually a clear and present warning to get out of debt and – with research and an awareness of your own financial goals – to possibly move into owning more Gold and Silver. 

Reading between the lines in the main stream news gets easier the nearer the property crash approaches. Here’s an example:

“Like hundreds of thousands of his generation, Graeme Cook turned to property as his favoured means of amassing wealth. But he started earlier than most, and went into it on a far greater scale. And now, like one in five landlords, Mr Cook, 53, wants an exit strategy. He plans to sell most, if not all, of his properties over the next decade.” (The Telegraph)

The above article’s title was 'The Buy to Let Stampede Begins.' A cursory glance makes that sound as if people are rushing into the property market. But the actual article was saying the exact opposite – people are beginning to rush out of the property market. The stampede is for the exits. 

These monthly updates are our attempt to block out the noise and explore below the headlines. So, the above is as clear an example of this double-speak as is possible to find. But, if it is a good year to consider moving out of property, why move that cash into Gold?

 

 

How is Gold performing against other investments this year?

Based on the financial mainstream headlines, we’d all be forgiven for thinking the star of the last financial year was the stock market. But once again the headline noise is not telling us the full picture:

While all the news has centered around 'record highs' in the stock market indexes, few have mentioned that Gold’s gains in 2017 have almost exactly matched the Dow Jones industrials. Both are up a little over 9% so far in 2017 (while the S&P is up 10.4%).

A more important metric is their long-term growth rates since the beginning of the new century:

  • Gold is up 333%
  • Silver is up 210%
  • Dow Jones Industrials up just 88%
  • And the S&P 500 is up 68%

These figures were published today in Town Hall, so bang up to date. Yet, do these figures make it into the mainstream news, on either side of the left-right political isle? On the whole, no. Why? Because masses of people re-mortgaging and taking out loans creates wealth for the banks lending the money. On the other hand, owning our own private Gold and Silver and being financially prudent doesn’t. The economics behind the marketing is that simple.

 

 

Global View of Gold:

The modern Western mindset is sometimes lagging behind our Eastern peers, in the perception that owning Gold and Silver has inherent value. India is the most rapidly growing economy on earth, up 7% per year in GDP. And yet, in one poll, 73% of Indians agreed with this statement:

 

“Gold makes me feel secure for the long-term.”

 

So, in a sense, it doesn’t really matter what the property market is doing in the short term, Gold and Silver are trustworthy long term assets to hold. Start with some smaller coins or a small bar or two. Learn how easy it is to invest in this timeless, often beautiful, asset.

But having said that, when a property correction is coming, positioning oneself more in Gold and Silver is like your exhaust’s jet propellant in a street racing car movie – you were always going to get there faster and cooler than the other guy but now you might as well just go large and really pull ahead!

 

 

Gold vs. the UK Property Market Now:

Once again, I found the following brilliant piece of research this week, while browsing far outside the normal bounds of mainstream financial news – 'Steer Clear of Investing in Property' from the Business Section of The Indian Times. If you have an extra few minutes click and read, as they explore a direct comparison between investing in property vs. Gold over the last three years.

And if you dig hard enough, the facts supporting upcoming difficulties in our UK property market are clearly there, just ironically not published on a UK website but the website for the Swiss National Bank! Is this where the people with the real money go? That article was entitled 'London Property Market Vulnerable to Crash.'

“UK’s Land Registry data for three London boroughs shows transaction volumes in London — the number of houses being bought and sold — are at an all-time low. Back in December asking prices in London dropped 4.3% with inner London down 6%, more exclusive areas dropped by as much as 10%. The slump continued into the first quarter this year. London is now one of the five-slowest growing cities in the UK. London property has for some time had many of the signs of a bubble. However, it is always very hard to pinpoint when a bubble might burst. We are certainly seeing signs that the overheated market is beginning to cool. Of course, all ‘good’ things must come to an end….Does a downturn or bursting of the London property market matter for the wider UK, or the world? Certainly, as with previous bubble bursts, these things are mere tips of much more dangerous icebergs.” (SNBCHF.com

Whereas mainstreet’s The Independent declares “House Prices set to increase up to 7% next year.” But look a little closer and their article is based on research performed by a company called Hometrack. Research a little further still and one finds that Hometrack is owned by the same company that owns Zoopla, Prime Location, Property Software Group and USwitch – property and mortgage companies. So, could The Independent’s piece be viewed more an advertorial than an editorial? It’s so important to look below the noise of the headlines to the real facts underneath. This is the goal of these monthly updates.

So, remember the old adage that those who leave for the exits early always give themselves a higher chance of survival. We encourage our readers and clients to enjoy copious amounts of financial research but hope this month’s update shows the disparity between the headlines and some of the hard economic facts coming out of the property market versus the quiet yet consistent increase in the value of Gold and Silver.

 

Call Bleyer on 01769 618618 to talk through your Gold and Silver purchases. Tax savings are on offer with certain Gold and Silver products. 


 

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