All that glitters is not gold
In 2009, a member of Bloxwich Research and Metal Detecting Club, Terry Herbert, found 244 gold objects in a field in Staffordshire. The Staffordshire hoard was made of battle goods dating back to the mid-seventh century and is the largest collection of Anglo-Saxon gold and silver metalwork ever found in the UK.
The hoard contained 5.1kg of gold, plus silver and semi-precious stones and, you may remember, was all over the news both at home and overseas. We owe a debt of thanks to Terry Herbert, who reported his finding to the authorities so that we can see these objects today. The overall hoard was valued by the government’s Treasure Valuation Committee at £3.3m.
The Hoard shows that gold does retain some value across the millennia, but perhaps that gold is not the greatest way to invest. £3.3m is not a bad return on Terry Herbert’s metal detector, but I suspect that the warlord that buried the hoard was hoping for something more for his heirs. True, £3.3m could buy a nice property and car in Telford, but it is the hardly dynastic wealth warlords dream of, and will not strike terror in the hearts of the rival tribes of Shrewsbury or Market Drayton.
Perhaps a more sensible decision for our Staffordshire warlord would have been buy Kingdom of Mercia 2% perpetual bonds. To keep the numbers nice and round, assume the hoard was worth £10 back in the 7th century and, as we are friends, say that the gold was buried 1000 years ago. £10 invested at 2% compounded for a thousand years would be worth about £4bn today, a far better return than leaving your valuables in a hole.
Unfortunately, there has been a lot human stupidity since the seventh century. Not only did the Staffordshire warlord forget to return to his gold, but Kingdom of Mercia has long since defaulted on its bonds.
The experience of the Staffordshire warlord is not to comment about burying your wealth but to show the need to invest your wealth purposefully. A share or a bond represents a claim on an asset that produces wealth over time and allows you to grow your wealth.
Gold is a store of value and a hedge against people’s stupidity, but it is economically inert and is not a producer of wealth. Some argue that gold is a hedge against inflation, but in the short term it is poor at doing that. Gold has been more correlated to the value of the US dollar than inflation. You are almost certainly better off investing in productive assets with a yield, coupon rent, or dividend that will grow and compound your wealth over time. If you invest in productive assets who knows, you may be able to leave something to your dynastic heirs and have something to really impress the rival tribes in the Welsh borders.
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