Why did this happen? A “sell gold” view from Goldman Sachs and Societe Generale early in the month or the press reports indicating that Cyprus and perhaps other countries may sell their gold reserves, were the two drivers. By the end of the month, Goldmans were advising clients to buy.
With gold I guess you’re either in one of two camps. A “gold bug”, seeing the gold market as a great hedge against inflation and a stable commodity to own compared to the vagaries of the stock market. Or a “gold sceptic”, seeing gold as just another commodity with its special features being slowly whittled away given that countries no longer rely on gold reserves to back their currencies.
I guess my big problem with gold as a long term investment is owning something that doesn’t pay me an income and is priced typically in US dollars, so holding gold represents a non-income bearing commodity that may also contain some currency risk unless I also hedge at the same time.
The chart below takes a three year view and compares gold in US dollars (the dark purple line), gold in Aussie dollars (the blue line and worth a little less since our currency has strengthened around 10% over that period), fixed interest (the grey line) and Aussie shares (the light purple line, S&P/ASX 300 Accumulation). Gold has certainly performed well but the price has also been quite volatile. As a “hedge” in a portfolio, there are times when it moved in step with equity markets and times when it moved in the opposite direction.
No doubt the debate about the long term investment merits of gold will continue and depends on your view of the “precious” commodity.
Gold versus Shares versus Fixed Interest over the last 3 years
Indices:
The
Australian All Ordinaries Index has moved up increasing +77 points (or +1.5%) since closing last
Friday to 03:30 pm today.
The
rest of the world as measured by the MSCI index increased +2
point (or +0.6%) in A$ from closing last Friday to end of trade
Thursday.
Have
a great weekend,
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