- The commodity value of a gold Olympic medal has appreciated some 20% since the Tokyo games
- Jesse Owen’s 1936 gold medal fetched nearly £1.5m at auction in 2013
- The Paris Olympics will affect the region’s GDP, namely via: capital expenditure on stadiums and other infrastructure; increased employment and tourism
The Olympics typically signals a renewed interest in three commodities: gold, silver and bronze – and this time around is no exception. Since the opening ceremony in Paris last Friday (26th July), the spot price for gold has surged to $2,453 an ounce, just $30 off its all-time high. Unfortunately for the Olympic winners, it’s been some 100 years since their hard-earned medals were made completely of the respective commodity. Nowadays a gold medal weighs 529 grams – which if it were pure, would-be worth c.$45,000, however the Paris Olympics gold medal only contains around 6 grams of gold and 505 grams of silver, giving a readily realisable commodity value of c.$1,030.
Meanwhile, the silver medals, which are still made from 100% silver would be valued around $520 and the bronze medals, an alloy of copper and tin would only be worth $5! Although these values are comparatively low, multiple factors including the global clean energy transition (supporting copper prices), fiscal spending from China (which would further increase demand for copper, and therefore increase price) and economic stabilisation in China (reducing the gold price) could mean that fortunes are skewed toward silver and bronze in years to come as opposed to gold.
Value of Paris Olympic medals ($)
Source: Capital Economics
Truth be told, Olympic medals are often worth more than their commodity value, and this year’s medals have the added appeal of a 19 gram piece of iron from the Eiffel Tower. The highest reported amount that any gold medal has ever fetched was won by Jesse Owen at the 1936 Olympic games in Berlin. That year Jesse won a total of four medals! Placing first in the 100 and 200 metre sprints, Long Jump and 4×100 relay. It isn’t known which event the medal was specifically won at, but with such strong historical significance – it sold for $1,466,574 at auction in 2013.
Bowmore Portfolios
While we don’t currently hold commodity exposure within portfolios, we do allocate to Chinese equities which, because of the sheer size of their economy, have an affect on global demand for commodities. We have written before about gold becoming the safe haven asset of choice for the Chinese consumer given the property crisis destroying domestic consumer confidence in recent years. However, with green shoots of government support – most recently announcing a preliminary plan to purchase unsold properties and just this week vowing to support the consumer – a fall in demand for gold could be imminent, as Chinese consumers return to more traditional means of wealth generation and preservation.
In terms of the Chinese consumer, we are positioned to capture an uptick in sentiment through our actively managed emerging market exposure, which currently makes up 14.98% of the regional allocation. With well recognised names like Tencent Holdings and Alibaba in positive territory YTD, this may signal a change in fortune is on its way.
