April 7, 2017 5:17 am

Gold: To Invest Or Not To Invest?

Gold investment is something always talks about various opinions. A lot of people claim that gold is the ultimate store of value that has withstood against all odds for over a millennium, and will continue to stand when the world’s economy collapses under the overbearing weight of its own debt. Other opinion corroborates with John Maynard Keynes that gold: is a non productive, non yielding asset that only crackpots and conspiracy theorists loves.

Gold price graph

Regardless of whether you love gold or despise it, it has always been a part of some of the biggest news stories in the past decade. At the time when Gordon Brown, as Chancellor of the Exchequer, stated that a huge amount of the UK’s gold reserves would be sold in May 1999, the value of gold was at $280 per ounce. From that point forward, gold skyrocketed to over $1,900 per ounce in 2011.

After the collapse of the Lehman Brothers in 2008, the price of gold picked up again. It had gained just over 120% in five years prior to the event and rose by the same amount in just three years after its peak price.

In 2012, although gold finally ran out of steam, it has borne witness to some sharp reversals in 2013. Compared to the initial downward blow in April, the gold followed a more sustained selling in the month of June. The factor that contributed significantly to this spiral was the withdrawal of assets from the exchange traded products backed by the physical gold.

As gold does not produce any profits and does not pay any dividends, it is difficult to value it in the same way as other fiscal instruments like shares, bonds and property. There is a heated debate regarding this issue that it is better gaining exposure via bullion or via investing in shares in gold miners, but that is not something that affects the portfolio of the ordinary investor.

Andrian Lowcock of Hargreaves Landown said, “It is worth having some exposure to gold as a hedge against future inflation. The impact of quantitative easing has been underestimated,” while Ross Ciesla of Veritas Asset Management said, “There is no valuation support, no dividend yield and no management to question when it underperforms. And, until recently, sentiment has been too bullish.”

The question is: which side are you on?


By G+ Author: Elizabeth Steinfeldt.

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Elizabeth Steinfeldt

Elizabeth Steinfeldt

Writing/Blogging about Finance, Investing, Economy, World News!