Our readers may be tired of us espousing on the virtues of gold. But we think it is more than just a safe haven play.
Gold is becoming accepted as an investment alternative to more and more investors. The growth of Gold ETFs has made it easier for retail to invest.
The growth of the middle class in the Asia region has brought more gold buyers into the market.
Gold is being seen as a diversifier for portfolios in the mainstream bond and equity portfolio structure.
With global interest rates at 0 or slightly above, the cost to hold gold is relatively small. Investors can borrow against gold.
Gold is more and more seen as a hedge for inflation and a hedge for currency weakness in the current FX wars.
Those that will tell you to stay away from Gold will highlight:
Gold doesn’t pay dividends or interest. This is an argument for earlier times when there was interest paid on bank balances.
Long term returns will not match other asset classes. (see chart below)
Gold is only worth what someone else will pay for it, there is no intrinsic value.
*As of 31 December 2018. Computations in US dollars of total return indices for ICE 3-month Treasury, Bloomberg Barclays US Bond Aggregate, MSCI US, EAFE and EM indices, Bloomberg Commodity Index and spot for LBMA Gold Price PM. For compounded annual growth rates see Appendix II.
Thoughts for the Weekend
*Equities had the bounce we were looking for and for traders we would suggest squaring longs from earlier this week and go home square for the weekend.
* FX: GBP been beaten up enough? NOK clawing back some of the losses from this week, we think the Euro will come under pressure next week. (Italy among other issues weighing on the currency)
*Oil: we still see a $55 to $65 trading range until proven otherwise.
One last chart:
EURNOK vs VIX seem to confirm our view that the NOK trades at the mercy of the volatility in the equity market!
EURNOK in green
VIX in Pink