A client asks: Do you think gold is something we should be looking at?
My response: I’m not anti-gold by any means but I am struggling to see a good entry point.
Here are some recent stats for the physical gold ETF:
1. It’s up 17.7% since 19/3, having dropped 12% from 6/3.
2. Since April 2011 it’s up 16.5%, since Sept 2011 it’s down 10.3%.
3. Since Dec 2015 (most recent low) it’s up 62%.
That looks and feels very volatile to me. It suggests that the people buying gold don’t really know what the fair value is.
If you invest we have to get two things correct – the entry point and your exit point. You’d certainly be buying at something approaching a recent high. If you did how much growth from here would we be looking for? And how much of a drop before we added to the holding or sold at a loss?
Those questions are more easily handled when we are talking about large cap, small cap, emerging markets and bonds – the tea leaves (inflation, interest rates, GDP, unemployment etc.) are easier to read. But gold is a law unto itself and effectively a single stock.
Rather than buying a physical gold ETF you could buy gold producers but that adds a new layer of complexity and analysis etc. As the old adage goes: “A mine is a hole in the ground with a liar standing next to it.”
I’m not sure that gets us much further forward. Shall we have a quick call to discuss further?
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