Whoever wins the UK election, voters keep backing gold...
RECORD HIGH gold prices, record low trust in government and politics,
writes Adrian Ash at BullionVault as the UK votes in its 2024 General Election.
Maybe the two go together?
"Just 9% of the British public say they trust politicians to tell the truth," say pollsters Ipsos...
...going even further back to 1973 and finding that fewer than 1-in-5 respondents to its British Social Attitudes survey believe the present system of governing Britain doesn't need to be improved dramatically.
That's 14.0% higher for 2024 so far...
...28.2% higher since the 2019 General Election...
But if today's record price of gold reflects record mistrust in politics, then the UK electorate only has itself to blame. Because modern history says that, when viewed through the prism of gold prices, voters keep choosing the most awful frauds to run the country.
Over the past 6 decades, and noting that Harold Wilson got the keys to Number 10 twice, only 1 out of 12 prime ministers presided over a drop in the price of gold in Pound Sterling terms (column F).
But that data only looks at the nominal price of gold. And inflation matters.
So when we adjust the price of gold by the cost of living (column G) – and if we put the 49 Days' Queen in the bin – then you have to go back to John Major in the 1990s to find a Prime Minister who didn't see the real value of gold rise during their time in Number 10 Downing Street.
Might today's Labour landslide (as predicted by everyone) snap this pattern of worsening trust, rising gold?
Perhaps.
Tracking back to Harold Wilson's victory in the General Election of October 1964, gold has way outperformed cash in the bank, house prices and even the UK stock market, dividends included.
The table above adjusts those asset classes by RPI inflation for UK investors and savers. And as you can see, gold rose sharply during the inflation crisis of the 1970s, and again during New Labour's house-price bubble and banking bust of the early 2000s.
Across the past 14 years of Conservative rule, gold has underperformed the total return from UK shares, but its 28% gain over and above inflation contrasts with house prices flattening as the value of cash savings sank by more than one-third.
Moreover, the 4.5 years since Boris Johnson vowed to 'Get Brexit done' and won a landslide victory over Jeremy Corbyn's Labour Party – just in time to be confronted by the Covid pandemic – have seen the real value of gold rise more than 21%...
...while investing in the stock market has lost almost 3% after inflation...
...real house prices have dropped over 7%...
...and cash in the bank has lost nearly 18% of its purchasing power.
Further back, when the Conservatives were in office if not in power from 1970 to 1974 under Ted Heath, inflation exploded and the stock market sank amid the first global Oil Crisis. And it's hard to imagine Labour Party government under Harold Wilson handling that disaster any better.
More recently, it's hard to believe that the banking crisis starting in 2007 would have been any less catastrophic under a Conservative government than under New Labour, not least because the Tories would have done nothing to curb or tame the preceding bubble.
But the fact is, gold has repeatedly acted as investment insurance for UK residents wanting to spread their risk and defend their savings, whether against geopolitical curve-balls or against the slings and arrows of the buffoons we seem to keep electing to power.
Maybe you know the famous line from Victorian socialist Bernard Shaw:
"[When] you have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government...[then] I advise you...to vote for gold."
Shaw
wrote that in 1928 as Britain (briefly) put itself back on a Gold Standard after the catastrophe of the First World War. But over the past 6 decades, it's worked pretty well as financial advice too.
