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July 3, 2012

Going for the (Liquid) Gold

By Pardhasaradhi Gonuguntla

New York, New York – Reported by Christine Wei for Elite Traveler, the private jet lifestyle magazine

Investors have been watching the rise and fall of gold nervously, but another honey-hued commodity has been inspiring more and more financial confidence as of late. In the past four years, the top ten performing whiskeys have shown a whopping gain of over 400 percent, shooting past the growth rates of gold and diamond at 146 percent and ten percent.

The similar concept of putting money toward valuable vinos is not a new idea, but it turns out that investment grade scotch (IGS) is turning a pretty profit too. Whiskeys in this high-ranking group share two characteristics beyond the potential to significantly increase in value: They are single malts and are stored in fully sealed bottles—not casts. Topping their sales charts are a 64-year-old Cire Perdue Macallan, which was sold at an auction for $460,000, and a coveted Dalmore that retailed at a record £125,000 (around $202,000 today).

But financiers know that investments are all about growth and demand—and that’s exactly what sets whiskey apart from wine. “Wine is being produced every single year, but with whiskeys what’s distilled today will be released 20 years down the line. That adds an element of exclusivity,” says Andy Simpson, founder of the Whisky Highland valuation library. And especially when stocks start running dry in the future, demand for old, rare whiskeys will continue to rise. One distillery, Port Ellen, had already closed in 1983, followed by much speculation about remaining supplies and accelerated price increases.

Those interested in getting in the game can keep an eye out for several categories of liquor. The “trophy bottles,” like the aforementioned Cire Perdue as well as Dalmore’s Drew Sinclair and Trinitas, are the rarest whiskeys that are hard to come by because they’re often one-offs. Though not quite as impossible to nab, antique bottles from the turn of the 20th century are also tied to high auction values.

Whisky Highland keeps an index of the most promising distilleries—based on the metrics of total value, most expensive bottle, average price and percent increase—but the right bottle matters just as much as the producer. While Glenfiddich and Balvenie join Macallan and Dalmore in their platinum status, it’s not guaranteed that every bottle will perform exceptionally. As Simpson’s tongue-in-cheek words of caution are: “Get the wrong bottle from the wrong distillery and you’re better of buying Highland Spring than Highland Park.”

At the same time, while many collectors favor turning to distilleries that have historically shown gains more rapidly, some older releases of independent bottles (for example, Cadenheads and Gordon & Macphail) have also quickly increased in value. Both have their own appeal—some distilleries can’t be acquired through independent bottlers, though the latter group is becoming the go-to for aged stocks—so an open mind will lead to better results.

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As with all investments, timing in buying and selling can be everything. Because it’s typical for first releases to sell at an inflated amount, and values can come down by as much as 50 percent within the first two months, patience is key. Be watchful of when previously successful distilleries might be changing directions or releasing too many “limited editions” and you’ll have better chances of being golden.

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