Video Source: Reuters CCTV via YouTube
Is ‘Welsh gold’ more valuable than gold mined from anywhere else? Some believe it is. Others believe this is just hype ahead of the big day for Harry and Meghan.
Since 1923 various members of the British Royal family have chosen to use Welsh gold in their wedding rings. Famous wearers include Queen Elizabeth II, her daughter Princess Anne, Princess Diana and the Duchess of Cambridge.
This, combined with the fact that there is no active Welsh gold mine today confers on “Welsh gold” a certain exclusivity.
The prices charged for Welsh gold very much play on this desire for it to be seen as the ‘rarest’ and most ‘sought after’ gold in the world.
In reality the rarest thing about it is the lack of Welsh gold in the jewellery and other items claiming to be “Welsh gold”. Welsh gold jewellery made today is likely to contain far less than 1% of the exclusive metal. The rest of the piece will be made up of gold from elsewhere.
Such little gold is used in the items of jewellery that the main jeweller in Welsh gold will not even say how much is in each piece. Speaking to the BBC in 2011, Ben Roberts MD of Clogau Gold said:
“The precise amount is a common question but one that we try not to stipulate because it puts us on the hook to continue using the same percentage and it’s one which might be subject to change in the future depending on supplies (although at present we have no plans to change the mix).”
Gold has many uses. For some it is for wedding rings, for others it is the backbone of internet technology, for millions it is financial insurance and a store of value. Each industry impacts the other as they clearly affect demand and supply. Very rarely does one industry claim to play the role for another.
Except in the case of Welsh gold.
As a result of both the 2011 and upcoming Royal Weddings there have been several reports regarding Welsh gold and its value. Welsh gold is not for the exclusive use of the royals. There is now jewellery to buy with the ‘Welsh gold’ label. Promising the wearer that they are adorned by the ‘Gold of Royalty’.
Many make it sound as though Welsh gold is a sure fire investment, even more so than ‘normal’ gold. This is misleading.
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Jewellery is for romance, not for investment
Currently Welsh gold is predominantly used in jewellery and other artisan items. A premium is placed on the items because of the provenance of less than 1% of the total gold use in the piece.
Jewellery is a product and it is not an investment. As we have explained before it is not a good investment:
It is estimated that the markup on a diamond wedding and engagement ring is between 300% and 1000%, with a tendency towards the lower end of the scale. The chances of us seeing this back are unlikely in the extreme as a buyer will only take into account the components of the jewellery rather than the purchase price.
This should be considered when buying any piece of jewellery that you are hoping will make a good return. It should particularly be remembered if you’re considering a piece of jewellery containing a small amount of Welsh gold. At the end of the day, no one will care where the gold came from. They just want to know it is gold, as we explained to CCTV earlier this month:
‘Welsh gold sells very well in a jewellery level. But when we look at it in terms of investment ultimately Welsh gold is gold…chemically it is no different that has perhaps been mined in China, South Africa and so on. It is a nice premium to put on something but if you were to take it to a refinery and get it melted down it would be considered no different [to gold from elsewhere] and so you would receive the spot price that day.’
Why is the gold considered to be rare? Because the gold used in Welsh gold jewellery today comes from mines that are no longer in use. It is not because it is different to any other mined gold. It is not purer than other jewellery and it has no evidence of being a better investment than any other item or gold for investment. This means that is as rare as the gold that has been mined for thousands of years around the globe and continues to be today.
Today, gold is rarer than it has ever been.
‘Gold is a finite asset. It cannot be reproduced at the rate that we create money and no-one has discovered the art of alchemy. Gold will run out. We are now at a point known as Peak Gold. We are discovering and mining less and less gold in order to meet demand.’
Don’t invest in gold because of its provenance, invest in gold because it is gold
Welsh gold is a great thing for the British Isles to have. It has a long history and its connections with the Royal family certainly makes it feel very special. However, it is a romantic notion that its provenance makes it more valuable.
If you wish to hold gold as part of a balanced portfolio then buy investment grade gold, for example a bullion bar or sovereign coin. Do not think that an item of jewlery (no matter its history) will afford you the same protection and return on investment.
When you buy gold bullion for your portfolio ensure it is of a purity not less than 995 thousandths or 99.5% pure. It must be in the form of a bar, or of a wafer, of a weight accepted by the bullion markets. The bullion must be immoveable and stored with a secure third party. It cannot be taken possession of. Ensure it is stored in allocated and segregated storage.
The purity is important here, unlike with Welsh gold jewellery you must know how much gold is in the bar. Do not be dismissed by the seller to be told that ‘we try not to stipulate’ how much gold is in the bar ‘because it puts us on the hook’. This is not good enough for an investment product.
Buy your gold from a trusted dealer, long established dealer and own gold in the safest way possible – allocated and segregated. With investment grade 0.9999 pure gold, there will be no quibbles regarding its price should you wish to sell it in the future and it will always be liquid. Something which cannot be guaranteed with jewellery, Welsh or not.
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Gold Prices (LBMA AM)
17 May: USD 1,288.85, GBP 952.07 & EUR 1,090.50 per ounce
16 May: USD 1,291.75, GBP 958.61 & EUR 1,093.60 per ounce
15 May: USD 1,310.05, GBP 966.42 & EUR 1,098.35 per ounce
14 May: USD 1,320.70, GBP 972.30 & EUR 1,101.86 per ounce
11 May: USD 1,324.80, GBP 978.23 & EUR 1,110.45 per ounce
10 May: USD 1,314.80, GBP 969.27 & EUR 1,106.80 per ounce
Silver Prices (LBMA)
17 May: USD 16.39, GBP 12.14 & EUR 13.90 per ounce
16 May: USD 16.26, GBP 12.07 & EUR 13.79 per ounce
15 May: USD 16.41, GBP 12.12 & EUR 13.77 per ounce
14 May: USD 16.65, GBP 12.25 & EUR 13.89 per ounce
11 May: USD 16.76, GBP 12.35 & EUR 14.04 per ounce
10 May: USD 16.60, GBP 12.24 & EUR 13.97 per ounce
