‘Gold shone with the placid certainty of received tradition’
I had the happy occasion recently of receiving a telephone call from an old client and friend – a physician safely retired near the sea and alongside one of the South’s oldest golf clubs. It was good to hear from this student of the markets – one of life’s steady and thoughtful practitioners. Back at the turn of the century, Doc foresaw much of what would happen economically in the United States and purchased what he considered enough gold to see him through it.
Vanity Fair’s Matthew Hart offers this masterfully written overview of those early years of the 21st century:
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896 – an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.”
It was in that time frame, when gold was stuck in the $300 to $400 per ounce price range (a time not unlike our own when gold has been stuck in the $1200 to $1300 range), that Doc transferred roughly $500,000 of his net worth into gold coins. His goal, like most of our clientele, was not to become wealthy through gold ownership, but to protect the hard-earned wealth he had already attained. “I still have all the gold I purchased from you,” he said simply. “Every ounce of it. It’s now worth well-over $2,000,000. I want to thank you again for your book* and your advice. It made a great difference to me as you may have gathered.” (Ed note: At the interim top – the $1896 Matthew Hart mentions above – Doc’s holdings reached a value well over $3,000,000!)
“That,” I said, “is the kind of story we enjoy hearing around here, Doc. I’m happy for you. Happy gold could help you like it did.”
“We had some very interesting conversations back in the day,” he said with a chuckle, “and gold did for me what we thought it would, what you said it would.”
The conversation then drifted to other of life’s pursuits for both of us and ultimately to the purpose of his telephone call – a fresh gold transaction. We completed our business and I left the conversation with a strong sense of satisfaction. We get a steady stream of phone calls like Doc’s, but it is always good to hear real-life tales about gold’s role in preserving our clients’ assets.
The fact of the matter, though rarely discussed, is that gold ownership has as much to do with personal philosophy as it does finance and economics – though by that I do not mean to diminish the importance of financial markets, or politics for that matter, in our everyday lives. Things, though, do need to be kept in perspective and gold helps toward that goal – once one understands its true nature.
In many ways, gold ownership, as Doc would likely attest, is a rational portfolio decision that suits the times, but it is also a life-style decision. As Richard Russell, the late purveyor of the Dow Theory Letters once put it, “I still sleep better at night knowing that I hold some gold. If or when everything else falls apart, gold will still be unquestioned wealth.” And one that helps you sleep well no matter what happens on Wall Street or in Washington D.C.
–– Michael J. Kosares
* The ABCs of Gold Investing – How To Protect and Build Your Wealth With Gold (Please see link.)
This piece is an updated repost of an article that originally appeared in News & Views (our monthly newsletter) in July, 2015.