Why switching out pounds and pence for gold bullion makes good sense

Reading Time: 6 mins

This gold bullion post is sponsored by Tally

The UK is still witnessing double-digit inflation, and, if you’ve any form of wealth, this is very bad news indeed. That’s because rising inflation means your pounds are silently losing real-term value. In other words, £100 can buy you less today than it could this time last year.

So, how can you combat this? Well, the only way to beat inflation is to earn above-inflation returns, which is extremely difficult given average investment returns have been well below 10% in recent times.

As for keeping cash in the bank… while interest rates are on the rise, no savings account pays anything close to the latest inflation figure of 10.1%. The top easy-access savings account is paying just 3.15% p.a., with the best fixed-rate savings rate at 4.5% p.a. with a fixed term of 2 years.

And this explains why investors typically turn to precious metals when times are tough. In the past 15 years alone, gold has on average increased in GBP by 9.7% per annum. So, how can you get in on the action? Keep on reading for all the details, or click on a link to head straight to a section…

A brief history of gold

Shiny yet durable, gold is one of the most precious metals. And, before the advent of paper money, gold was used in coins as a widespread medium of exchange when buying and selling goods.

Nowadays, gold has many other practical uses such as dentistry, aerospace, and electronics; if you’ve got a smartphone, it’s likely a tiny amount of gold was used in its making.

the introduction of FIAT CURRENCY

Fiat currency is the name given to money issued by a ruling government that is given value by decree (i.e. the central authority stating it has a value). For example, Britain’s fiat currency is sterling, which is issued in Great British Pounds sterling (GBP). When sterling was first introduced, pounds were backed by silver, but in 1663 silver was switched out for physical gold, meaning you could go to the bank and exchange your money for gold. However, shortly after WWI, the pound became pegged to the US Dollar, which was still on a gold standard, meaning GBP was indirectly also on a gold standard. But due to the overprinting of banknotes, in 1971 the US dollar ceased being exchangeable for gold and since that time no national economy has been on a gold standard.

Ever since pounds stopped being linked to the gold price, they ceased having any intrinsic value. We just take it for granted that £1 is worth £1 because our government says so.

However, fiat currency is delicate. If a government collapses or society loses confidence in the value of its domestic currency, then big problems can occur. And we’ve seen this happen multiple times in multiple countries when the national currency is not anchored to a physical asset like gold.

In the case of the Weimar Republic, a period of hyperinflation was experienced in the early 1920s because its government decided to print millions of new German Papiermarks in a desperate attempt to service its war debts.

Meanwhile, the Zimbabwean government followed a similar monetary policy in the mid-2000s, with the country’s monthly inflation rate exceeding 70 billion per cent at one point.

Gold as a hedge against inflation

High inflation is the silent monster that eats away at wealth. Often referred to by economists as a ‘stealth tax’, inflation diminishes the value of cash savings. In other words, anything you have stashed away will buy you fewer goods and services as time passes. Right now, UK inflation is officially running at 10.1%

why iNFLATION is high right now

There’s more than one reason inflation is rampant right now. However, arguably the biggest is the Bank of England’s policies to slash interest rates to near zero and massive money printing in reaction to the Global Financial Crisis (GFC) in 2008.

And again, during COVID-19, the UK’s Central Bank decided to further inflate the money supply in a bid to support the economy. This is why we saw cheap credit card deals, ultra-low interest being paid on savings, and cheap mortgages. We also saw unprecedented levels of “money printing” (quantitative easing).  Indeed, by November 2020 almost £900 billion had been added to the money supply. Remember what happened to the Weimar Republic…

The reversal of quantitative easing (where central banks magic up money to buy newly created government bonds to try and create inflation) is sometimes called quantitative tightening or QT. In layperson’s terms, QT is the Bank of England (BoE) trying to reduce the billions of pounds created from thin air from sloshing around the economy. From the BoE’s very own website: “Now that we are reversing QE, some of those bonds will mature, and we are selling others to investors. When that happens, the money we created to buy the bonds disappears, and the overall amount of money in the economy will go down. And, while the Bank of England has recently hiked interest rates and started QT, it’s nowhere near meeting the current rate of inflation.

why demand for gold increases with high INFLATION

When the UK economy wobbles, investors typically turn to safe asset classes. And, given its historical use and limited supply, gold is arguably the safest around. Put simply, you can’t just print more bullion, which is why it’s considered a good hedge against inflation. But don’t just take our word for it. In 2022, gold performed very strongly indeed. Last year we witnessed the gold price go from £1,338 an ounce in early January to £1,509 by 31 December 2022. That’s a 12.7% increase, comfortably above the official inflation rate.

In contrast, the FTSE 100 rose just 0.9% in 2022, while the FTSE 250 fell a massive 19.7%. In terms of cash, while savings rates have risen from rock-bottom lows, no account pays anything close to the current rate of inflation.

TallyMoney: gold savings made easy

As the world’s first non-fiat currency to be accessible in individual accounts, TallyMoney lets you save, send and spend gold just like pounds. Better still, Tally also takes care of the insurance and storage of your physical bullion providing uncapped balance protection.

how tally works

When you transfer money into your Tally Account, those funds are used to purchase your LBMA-approved gold at the global wholesale price for 1-kilo bars. Your gold is denominated in your account as ‘tally’, with every 1 tally representing 1 milligram of physical gold you own, which is securely vaulted on your behalf.

You can save, send or spend tally just like pounds or euros or dollars using the smartphone app and Tally Debit Mastercard. However, unlike foreign currencies, there are no hidden charges such as transaction costs, fees for withdrawing cash, and mark-ups on foreign exchange rates. Instead, Tally has a fair and simple fee structure. There’s a one-off £19 account activation fee that gives you access to the technology and platform, and an ongoing 0.9% p.a. account-keeping fee, (calculated daily and charged monthly), that pays for gold storage, insurance and operational costs. So less than 1% cost to use money that increases in value at an average rate of nearly 10% per year. Kind of the opposite of what we’re facing keeping pounds in a bank.

So, if you’re interested in ditching pounds for gold, Tally’s asset-based money could be for you. Download TallyMoney here to get started. As a friend of MoneyMagpie, you’ll even get a 200 tally bonus (that’s 200 milligrams of gold for free) to get you started once you’ve paid the one-off activation fee by using the link above or promo code MONEYMAGPIE200 during sign up.

Are you keen to learn more about investing? Sign up for our free fortnightly MoneyMagpie Investing Newsletter.


The money in a Tally Account is not fiat currency and the FSCS (Financial Services Compensation Scheme) does not apply. However, in the unlikely event that anything happens to TallyMoney Ltd (or its parent entity Tally Ltd), all of the gold represented as tally in customer accounts will promptly be sold by the Security Trustee (Woodside Corporate Services Ltd, FCA Ref No. 467652), and the fiat value of each customer account, less a 1% fee, will be deposited into the customer’s designated bank account. What’s the 1% for? This pays for the legal mechanism that would come into play and the prompt and efficient administration of returning customer money by the Security Trustee. No limits, no caps, just peace of mind.

MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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