10 Jul 2024
Market Metrics: Gold
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
Gold is an asset because it represents as store of wealth.
This undisputed fact has been the case for millennia and Gold is also purchased heavily in times of financial fear such as during the past 2 years which has seen a rapid rise in inflation.
For example, the price of one ounce of Gold in October 2022 was US$1,624 and today it is US$2,370 which is a 45.9% increase in 20 months.
However, the problem with investing in this asset is that Gold does not multiply.
A bar of Gold does not produce baby Gold ingots which means an investor can make no money for extended periods such as between late 1970’s and the 2008 Global Financial Crisis (some 30 plus years) during which time an investor did not make a dollar.
Gold investors again made no money between 2011 and 2020 during which the Gold price once again remained below the 2011 purchase price.
Click for charts.
The principles of Value Investing teach us to not invest in commodities, Gold might be shiny but it is just too risky.
WARNING, this does not constitute Personal Advice. To discuss if this is an appropriate strategy for your given circumstances, please do not hesitate to contact us directly.
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