As the United Kingdom nears its “Brexit” decision on whether or not to remain in the European Union — “Brexit” merges “Britain” and “exit” — many small investors are attempting to manage the uncertainty by giving the ownership of precious metals a second look. I spoke with Ross Norman, CEO of Sharps Pixley Ltd., to learn about the business’s new efforts to bring the benefits of bullion ownership to the ordinary consumer without involving an investment broker or paying out needless commissions.
The United Kingdom’s general election of May 2015 was soundly won by David Cameron and the conservatives; as a concession to the electorate and the euro-skeptics who supported his government, Cameron agreed put a referendum to the public concerning continued European Union membership. Though Cameron initially envisaged the referendum taking place in 2017, the date was moved up a year earlier to June 23, 2016, as business had made it clear they were unwilling to wait out this kind of uncertainty. Recently, the notion of owning or investing in bullion has been placed firmly on the front burner for many, as there has been talk of pressure on currencies, as well as a possible fall in the value of the pound and British-based businesses, should the U.K. decide to exit the E.U.
Bullion comes in many forms: bars and ingots, medals, and of course legal tender coins, whose popularity has been increasing substantially, with many world mints moving to get in on the game. As a commodity, the price of gold or “spot price” fluctuates up and down, minute by minute, and is priced in U.S. dollars like most other commodities. It is essential to stay on top of this activity in order to understand the market and to safeguard your investment.
Enter a new name on the High Street–new at least in terms of what this company wants to bring to the consumer: Sharps Pixley’s name and brand is more than 238 years old and has been a major player in the business of diamond broker, gold merchant, and auctioneer since its original office opened in 1778. Over the decades and centuries, it has indeed evolved, changing locations and even ownership. Ross Norman, a British businessman who purchased the brand of Sharps Pixley Ltd. in 1998 after the license expired, has brought back the company’s name and reputation for excellence in the hopes of satisfying the demands of the bullion-buying “in the know” public, while educating would-be bullion buyers.
Norman has opened new premises for this very task a stone’s throw from St. James Palace in Central London. The move has already garnered great interest from passersby who stop in to ask about the benefits and risks associated with bullion; they are provided with concise information and in many cases are able to walk away with the start of real bullion investment. Brexit or not, the opportunity for the public to invest easily may become a firm fixture and familiar sight on our main shopping streets. — Michael Alexander
Michael Alexander (MA): First, I have to say, the new premises of Sharps Pixley here in the heart of London are impressive and very elegant, and are a welcome addition for active buyers of bullion-related products. Can you offer my readers a bit of background of Sharps Pixley in the off-chance they have not heard of the brand before?
Ross Norman (RN): The name “Sharps Pixley” dates back to 1778 and was the second-oldest bullion trading house in London. Today the business leverages the same old-fashioned principles around trust and a personal touch on the one hand, with a modern twist which I hope is apparent from our stylish premises here in St James’s.
Essentially, what we’re seeking to do is to “democratize” investments in terms of making bullion readily available and accessible to the ordinary investor — not just the high net-worth investor — and we have a comprehensive product range to do just that. As such, we are somewhat unique insomuch as we are making available the bullion products which are familiar to most investors, literally putting them “on the High Street” in the same way customers would find in other countries, especially in India, China, and of course Germany. And at highly competitive prices too. One normally thinks of dot coms when one thinks of game-changing or disruptive businesses; we see ourselves as a bricks-and-mortar business, but also a transformative force for change too.
With financial markets so fragile, having some allocation to precious metals is certainly wise. As such, gold is not just a safe haven, it is also a long term store of value. To make the point, cash has dissolved by 90% in the course of my life in terms of what it can buy — or what economists call ‘purchasing power parity’ — while gold has a 3,000 year track record for maintaining wealth. The British public hold a very strong devotion and trust in their institutions, whether political or economic, and the UK has certainly had a long history of stability — far longer than many others — but there are no firm guarantees that this long-term stability will remain so.
In short, it’s always a good idea to have some protection in place and, of course, bullion holdings may be that guaranty or insurance. Sharps Pixley are in fact owned by Degussa, Europe’s largest seller and distributor of bars and coins, and it is their business model that we take our direction from, making these products readily available to the public. We are in effect an extension of what has been a highly successful business model in Germany.
MA: With the opening of the new office, it’s clear that you have a lot of confidence in the bullion market. Can you give a synopsis of the current trends that give you this level of confidence, and why the investor should share your optimism?
RN: A lot of the comments we’ve heard since our opening were, “your timing was perfect, spot on,” given that gold is the top performing asset year-to-date, up over 25% in sterling terms in the first quarter of this year. I wish it was foresight, but I would be lying. Some have pointed to our being the top gold forecasters in the London Market Association over the last fifteen years, but the precise timing was a bit of luck, although we did feel deeply confident that gold was primed for a physical renaissance at some point soon.
After seeing 16% year-on-year gains in the 2000’s, gold peaked at an all-time high in September 2011 at $1,922; since then it has given back about 40% of those gains. The correction lower was partly due to the strength of the U.S. dollar, and the positive narrative of the U.S. Federal Reserve detailing growth in the U.S. economy. Although there is modest growth, there are also signs that this may have run its course, and the broad consensus is that we are seeing a weakening macroeconomic environment.
The erstwhile sellers of gold in 2011 — the Central Banks, institutional investors, speculators, and futures traders, even at the retail level (think cash-for-gold) — have now turned buyers. From a floor at $1,076 at the beginning of this year, gold has rallied to just over $1,252 (mid-April), so there are grounds for optimism in gold given that it has achieved the best quarterly gain in four decades, with scope for more too.
With the possibility of a “Brexit” decision, we may well also see weaker sterling. Correspondingly gold in sterling could rally, but this is a short-term consideration. With a current spot price of nearly £865 per ounce, some suggest gold could reach as high as £1000 prior to the referendum. For U.K. investors with a short-term mentality, there’s a window of opportunity, but we would advocate taking a long-term view. If investors take a broad general view that leading economic indicators are fragile and even vulnerable, as the IMF suggests, then they should simply consider being in the market.
MA: Over-the-counter bullion products have been around a while now, especially with the availability of Krugerrands and Maple Leafs. During the recent financial crisis, they became popular again with a lot of investors who might not have considered precious metal holdings previously. Banks and the stock markets were performing poorly and many turned for the first time to bullion. From your activity, do you think these investors have continued with their commitment to bullion or have they wandered off elsewhere?
RN: That’s a good question. Back in the 1970’s and 1980’s, almost every high street bank or building society had a bullion coin desk. Back then gold was readily available; it was a thriving and liquid market. In the 1990’s gold became very dull price-wise, and with the decline in prices and trading ranges, those coin desks closed down. When gold became interesting again in the early 2000’s, the regulatory environment had changed and those commercial banks did not come back to accommodate the ordinary investor given tighter compliance rules, even though gold’s value was rising about 16 percent year-on-year from 2000 to 2008.
With the U.K. clearing banks no longer active in gold, there became unmet demand for bullion and we see it as our mission to explain or perhaps educate investors on its role, and then to meet it. Granted, the U.K. has less of a history of buying precious metals than our continental European friends, but that is changing slowly and steadily.
One should add that London does remain the center for bullion trading globally. There is also a diverse population from counties with a close affinity for gold buying that until now has had some difficulty in readily buying, storing, or even testing gold. Not now. So I don’t think those earlier investors have “wandered off” per se; I just don’t think they understood the potential offered. And that’s what we’re here for, to provide concise information and advice.
MA: The numismatic market has seen a noticeable increase caused by a spill-over from bullion investors who have ventured into buying high-ticketed rare coins; the increase in this kind of activity from auction firms has backed this up. Do you see a place for Sharps Pixley to expand into auctions or rare coins as an additional choice for your clients?
RN: What’s interesting in your question is the recognition of a clear shift to physical and away from paper assets. Clearly our focus is also about the actual yellow bars and making it simple to acquire them. On the subject of Sharps Pixley moving into numismatics, our parent company in Germany is highly active in this space so we are under some pressure to do so too, although we are light on experience in that sector. Interestingly enough, we do have some antiquarian gold bars from the Roman era and other interesting old bullion objects, such as the Rothschild Collection, and we are considering putting them on display in London later this year.
MA: Is there any one misconception held by the public or investors that you’ve come across with regard to investment bullion? If so, what is your advice to the newcomer?
RN: Well, to begin with, the first thing I’d mention are the calls we receive with interested or potential customers asking “can I just walk in and purchase a gold bar?” And of course our answer is always “yes.” Often we get those very same questions asked differently — whether they can just pay for a bar and walk out with it — which we confirm, as there is sometimes a disbelief. This does stem from the fact, perhaps, that the British public just doesn’t have the same history as our German neighbors, for instance. This may be why the Bundesbank’s gold reserves are ten times that of the Bank of England’s. Germany could be defined as a cautious nation whereas we may not be considered the same in that regard.
What would I advise to a newcomer? That would be to take a long-term view of your investment. If you buy gold and the worst should happen, it will pay out. If the worst should not happen, then you always have your gold — a little like getting your insurance premium back if you do not claim. And if the worst does not happen for a long while, then gold has a record in wealth preservation and it would therefore track higher, unlike cash. Buy gold, put it away, and don’t trade it as you might a casino chip. Leave that for the stock market.
MA: If we can get to basics now, which products you think have performed best over the last year and why?
RN: What we’ve observed since we opened remarkably enough is a polarisation of interest at each end of the spectrum, whether it’s interest in a gold kilo bar worth £30,000 — which high-end investors do buy in quantity and put away — or one-gram bars that sell for £35 and are equally and with as much enthusiasm put away by the smaller investor.
The interest in the one-gram bars reflects the view that many ordinary members of the public perhaps sense something’s wrong in the economy, and just want something meaningful and of intrinsic value. The premiums are higher on these small bars, so we do often suggest they save up for a one-ounce bar that is more competitively priced. A typical trade could indeed be £35 or £2 million, but not so much in the middle.
MA: Which leads me to my next question: can you tell us which product available at Sharps Pixley would be considered the smallest in terms of cost? And how great a purchase can be carried out? Is there an ethos here which recognizes no purchase is too great or small?
RN: Well, taking into consideration that our one gram bar sells for £35, we also have one-kilo copper bars which retail for just £18, and these do make great paperweights! In terms of investment I have to say that “white” metals — silver, platinum, and palladium — all carry VAT, unlike gold, so they are to a large extent much less attractive as an investment.
With the ratio between gold and silver being 1-to-80, it does suggest that either gold is over-priced or silver under-priced, given that the large term average is 1-to-40. In the ground the relative scarcity is closer to 1-to-16, so it is a shame that the VAT element on silver makes it difficult to exploit that mis-pricing as we see it. But going back to your question: no deal is too small and our team very much enjoys discussing the merits of gold with those who are unsure and just putting a toe into bullion investing.
MA: Speaking of quantity, one of the services Sharps Pixley offers at this location is a depository for personal bullion holdings. How does this work? Are my holdings my own and in the form that I’ve purchased, or are they part of an overall greater deposit of bullion?
RN: We have both. You can rent a safe deposit box which is yours; it’s £250 a year for a small box that can hold up to £1 million in kilo-bars. Or we also offer vaulting for the larger investors which can include placing your holdings in custody in our vault. Or you can place your holdings at our offices in Switzerland, Germany, or even Singapore, so it is a myth that gold is expensive to store.
MA: An investor would be able to purchase from your offices and have their holdings in another country or take delivery outside the UK?
RN: Absolutely, and this isn’t “offshore banking,” this service simply offers the investor the option of holding or keeping an asset where they feel most comfortable. Our concept is that a safe haven isn’t just what you keep, but where you keep your holdings. In that regard, you have a choice in using our international offices, so you choose a location where you feel your investment would be safest.
Our new safe deposit box facility is rated as Class 10, which is the highest one can obtain. Alternatively, we can arrange to transfer your metal holdings to another overseas location in a matter of minutes by swapping bars in one location with another, saving you any shipping charges. All that changes are your bar numbers.
MA: Lastly and on a lighter note, I see that your offices also sell what can only be described as a real indulgence and ultimate gift for that special someone: a real rose dipped in fine gold. Have you had any requests for other items to be treated in the same manner?
RN: Yes, we have actually. Our gold roses are dipped in 24 carat gold and they have proven very popular. We do have our own refinery in Germany but we do not make them there; the refinery mainly focuses upon semi-fabricated products. The roses take one week to make involving six workers and we buy the entire consignment of only 300 each month.
A request we had was from a couple who were recently married and wanted to know if their own wedding bouquet could be gold dipped in the same way and preserved for perpetuity, and the answer to that question is yes! The only drawback is that by the time the flowers would arrive to the factory, they’re not really looking their best; as such, we haven’t attempted to do so. So for this reason we advise that they pick up a couple here for the big day!
MA: They are beautiful indeed, Ross Norman, CEO of Sharps Pixley Ltd. London. Thank you very much for your time today.
RN: Thank you Michael!
Sharps Pixley Limited are located at:
54 St James’s Street, Mayfair
London SW1A 1JT
For more information on their hours of operation, products, and a live feed for spot prices of all metals commodities, please visit their Web site.
Photos by Michael Alexander.