Risk Warning

Please be aware that the price of precious metals can be very volatile and can go down as well as up by a significant percentage over short periods of time. While there is strong evidence that gold maintains its purchasing power over the course of decades and centuries, there can be times when it fails to match inflation or lay dormant, particularly when interest rates are high because gold has no yield and may be less attractive in that environment. A good example occurred from 1980 to 2000 when the gold price peaked with the inflationary episodes of the 1970s then fell and stagnated for 20 years until the Internet bubble burst.

Gold is priced in US Dollars so Sterling, Euro or investors whose base currency is in other denominations may see added violatility from the currency component. While we believe that all paper currencies will devalue relative to gold there will likely be episodes when the temporary strength in the likes of the US Dollar may curtail the gold price. This was witnessed in 2008 and 2011.

Gold should be viewed as an insurance policy to complement other investments in a portfolio and to diversify the risk posed by paper-based assets such as equities and bonds. While it may be viewed as an event hedge for exogenous shocks from natural disasters or terrorist attacks it should be remebered that in times of financial turmoil, such as 2008, the price of gold may also fall as liquid assets are sold to meet margin calls on illiquid assets with high levels of gearing.

The price of gold is also affected by speculative activity in the derivatives market and may potentially be manipulated or be subject to political intervention, interference or confiscation. For example, the margin on futures contracts may be raised by the Exchanges to quell the price of precious metals in order to support the fiat monetary system. There are also risks associated with supply and demand, in terms of consumer demand for jewellery and mining supply and hedging policies with regard to selling supplies forward and suppressing the price. Other factors to consider are the movements in interest rates, bond yields, inflation or expectations thereof.

The buying, selling and storage of gold carries costs and risks. Typically the difference between sale and purchase prices are in the region of 5% for kilo bars and higher for coins or small bars. Those buying gold should therefore treat their holding as a medium to long term investment albeit gold is not officially classified as an investment as there are no dividends, coupons, interest rates or yields associated with holding the metal, unless it is leased out. We absolutely guarantee that your bullion will not be lent or leased to any other party. Premiums for platinum and silver are much higher than gold so these metals in physical form are only suitabel for long-term investment. Those wishing to trade frequently may wish to consider electronic forms of holding the metal which do not necessarily result in the actual ownership of physical bars.

While gold is a highly liquid asset in London market trading there may be occasions when trying to buy and sell small quantities of physical bullion could prove time-consuming. For examples in times of crisis it may be difficult for the refiner to meet demand from all parties and clients become reluctant to sell in spite of much higher prices. Likewise, if there was a glut of gold on the market it could be hard to sell without reducing the price significantly away from the official London Fix to attract buyers. This is the added liquidity risk that purchasers of real assets face.There may also be delays in fulfilling orders due to weather-related events beyond our control.

Guernsey Gold Limited was established in July 2009. While the founders have experience in bullion dealing and related markets the Company is relatively young so there is inevitably a limited trading record.

Investors should also make themselves fully conversant of any tax issues with their tax adviser as there may implications for high levels of turnover when buying and selling gold bullion. Guernsey Gold is unable to provide tax advice other than stating the precious metals are VAT free in Guernsey.

There may be conflicts of interest relating to the time and commitment given to the activities of the Company and the Controllers may be involved in other business activities occupying a significant number of hours of the working day. The Company, its Controllers, officers and employees may  participate in connection with transactions of the Company which may involve conflicting interests. There may be other conflicts of interest not listed here although best endeavours will be made to minimise such conflicts to put the clients' interests first. For example, the officers of the Company may sell their own stock of bullion when supply is short or supplier lead times are too long. This should be of benefit to the client who will not be impaired by such activity.

In the event that the Company is wound up, for whatever reason, all bullion held in storage will be delivered to clients and other assets in the form of temporary deposits in the Client Accounts will be returned.