Precious clarity for investors

An interview with Robin Newbould, Managing Director of Ravenscroft Precious Metals

As Covid-19 gripped the global economy, investors looked for safe havens – and precious metals have always stood strong in times of crisis. However, an acceleration in activity can sometimes take investment services by surprise. Robin Newbould, Managing Director of Ravenscroft Precious Metals, explains how they dealt with the influx of demand.

How has the market for precious metals reacted to the global health crisis?

Robin Newbould: Gold hit record highs in every major currency with investors seeking the perceived safety of precious metals as Covid-19 wrought havoc on global economic fortunes and forecasts. Additionally, supply was restricted and reduced as the mines, logistics firms and refineries struggled to operate, pushing premiums and prices higher.

What initiatives has Ravenscroft developed for investors in this sector?

We stuck to our knitting, but were offering clients whatever assets we could find when supply was difficult. The order for 400x 50g bars from a Swiss refinery will be long remembered! Whilst we offer no advice, Ravenscroft provided investors with some apposite commentary during 2020. In March, we wondered if the “gold baby had been thrown out with the equity bathwater?” as it was difficult to understand a fall in the gold price given the circumstances.

Then, when the gold/silver ratio exploded to uncharacteristically high levels – with gold outperforming silver to the point where a gold ounce was trading at over 110x the price of a silver ounce – we commented that this was out of kilter with the historic norm and that silver might be due a rally. And, rally it certainly did!

What areas of the market have surpassed expectations?

The fact that gold seemingly became a “risk on” asset in 2020. Unusually, gold and US equities (the S&P500 Index) were quite strongly correlated, albeit with gold performing better and with less volatility. So how do we explain that? Well, there is a substantial amount of liquidity in all markets and resultant buying of all assets. There was very little opportunity cost to holding gold, which pays no income, over the returns of cash and bonds, whose income returns were de minimis in 2020, leading investors to take the “risk” of holding gold, which gave them the chance of making some capital gain.

Looking ahead, how do you see the market behaving in 2021?
With low and negative interest rates likely to persist for some time, and with the US Fed openly stating that it will allow inflation to rise, we think precious metals’ prices still have tailwinds supporting them. The other main drivers of their performance will include a weaker US dollar, other currency debasement fears, and continued concerns about the global economy’s ability to recover from Covid-19.

Further information

www.ravenscroftgroup.com

FINANCIAL PROMOTION: The value of investments and the income derived from them may go down as well as up and you may not receive back all the money which you invested. Past performance is not a guide to future performance and may not be repeated.