In times of trouble, head for hills and buy gold…
Thursday 9 April 2009
Generally gold is a safe haven if you mistrust the paper economy.
We were in conversation with the FT Investors Chronicle in response to a readers question about investing in gold. Click here for the article by Moira Oneill of the FT.
In our view gold is not an investment, rather it’s a speculation. There is a difference. In fact, the long term confirms this point.
Jeremy Siegel is a professor of finance at the Wharton School of the University of Pennsylvania…in an article by Mark Miller, he states "a dollar investment in gold way back in January of 1802 would have grown to just $1.62 by the end of 2005. Contrast that with the growth of other investment types: T-bills would have grown to be worth $293, bonds to $1,083, and a dollar investment in stocks would have grown to be worth a staggering $666,180. Not a thousand times better than gold. Not 10,000 times better than gold. But more than 400,000 times better than gold! So much for the claim that investment quality gold has actually outperformed stocks."
The point is that gold isn't so much an investment as it is a trading opportunity. If you're a trader or speculator, with knowledge of all the factors that influence the price of gold, and the dedication to watch your trades closely and dart in and out of the gold market, it may hold some appeal. But if you're an investor, whose desire is to make a reasonable return on your money over time without a huge time commitment, gold is probably best left out of your portfolio.
Sure there will be periods when gold races ahead of traditional stock and bond investments. But when you hear the clever commercials of the gold promoters trying to insinuate that recent short-term price movements are anything more than that, just smile and know that the path to long-term increase is more likely to be found if your pockets aren't filled with gold.
Reader comments from Investors Chronicle
posted by Murray Round Wealth Management @ 10:50,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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