Is it still a good idea to buy gold?

Is it still a good idea to buy gold?

27 August 2019 from Anna Svahn

For the first time since 2013, gold has passed the level of USD 1550 per oz. For those investors who have chosen to hedge the portfolio with the yellow asset, the recent weeks' turbulence in the stock market has not been quite as noticeable as for those who have been fully invested in equities. But in a situation when the price of gold in a relatively short time has gone from below USD 1300 to today's levels around USD 1530, the question is whether it is still a buying situation or if the opportunity was missed.

In an interview that Erik Townsend did in the Macro Voices podcast with Brent Johnson, they discuss the future of gold. Townsend has said before that he is waiting for a downside in the gold price to around $ 900 before he wants to buy, while Brent Johnson says the situation to buy gold was one, two or three years ago and that if you already have gold in the portfolio should one does not refill today. However, Johnson believes that if you still lack gold exposure, there is always a way to scale in, no matter what the price is right now.

See gold as your fire insurance. If you already have one today, it is unnecessary to buy another more expensive one. However, if you still have not insured your portfolio then it is always location, regardless of price.
 
Gold has received a great deal of traction from the least troubled macroeconomic situation, though not quite as much as one might have expected. Investors are increasingly turning to investment opportunities that will guarantee as little loss as possible, rather than the possibility of high risk-adjusted returns. This has resulted in the bond market with a negative yield increasing explosively and today more than USD 16 trillion is allocated in interest-bearing securities with a guaranteed negative return.
 

Today, more than 30 percent of the total global bond market is allocated to interest-bearing securities with a negative yield, and it does not appear to be reducing or even flat.

 

The consequences of a growing market for investments with a guaranteed negative return are especially great for private investors, where money is in pension funds that must invest in "interest-bearing securities with good credit quality". In the long run, the economic gaps will widen as it is primarily the people who are most in need of a functioning pension system will suffer the hardest.
 
In a world where risk-free investments entail a guaranteed loss, one may wonder why they are not seeking alternative asset classes instead. The contradiction to investing in gold is usually about those investors who opt out of the yellow stone who do not want to own something that does not in the long run generate growth. But, is not a yellow stone without growth with the possibility of return still a better alternative than a placement with a guaranteed loss?
 
It is not too late to expose yourself to gold. The train has not gone. In a world of minus interest rates and overvalued stocks, there has rarely been a better opportunity to start taking profits from the stock market with a long horizon to reallocate to gold to give yourself the opportunity to buy shares at reasonable prices later on.
 
 

@Anna Svahn

 

 

 

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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capitalprotected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

12/12/2019 18:00:40

 

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