Is the golden goose getting fatter? (Birmingham Post Article 08.11.2018)

When stock markets lose their glitter, as has been the case in recent weeks, gold is often the beneficiary.

So what is going on?

The rhetoric from many share watchers has been along the lines of bull markets do not die of old age so is this sell-off a bit more sinister than the others?

September and October have often been difficult months for global equity markets over the years and this one has been no different.

Donald Trump blames the Fed’s interest rate policies, much of the world seem to blame Trump for everything (not least the trade war with China), Europe blames us for Brexit, emerging markets are struggling … is there a holy grail of safe havens if markets continue to worsen?

Unlike other poor periods for equities, not many people favour bonds. Absolute return funds have experienced mixed fortunes. The diversified approach of multi-asset and multi-manager funds always seems to make sense, but what of that specific, almost forgotten, ‘old timer’ that is gold?

The price rose above $1,350 per oz in the first half of the year though it has faltered slightly since.

Still way off the all-time highs of above $1,900.

And by now some would suggest the golden boat has sailed for another year.

Dominic Frisby, MoneyWeek’s commentator on gold and commodities, writes: “Wisdom has it that the summer months – June, July and August – are the best time of year to buy precious metals (and their related stocks) with a view to offloading the following winter or in early spring.

“It’s one of those trades that seems to work better in the rear-view mirror than it does in real time, however.

“If you look back at a chart of gold you can usually find a low sometime in July, and then find a point between the following October and April, where the gold price was 10 per cent or 20 per cent higher, and then declare that the trade worked.

“Buying the low and selling the high in real time is a rather trickier proposition. That said, it is do-able.”

Sarah Coles of Hargreaves Lansdown told loveMONEY: “Between 2007 and 2011 investors flooded into gold and it almost tripled in value.

“However, for a so-called safe haven investment, it does come with a number of risks.

“The price can be very volatile. Overall it has fallen over 25 per cent since its 2011 highs, and during that time it dipped more than 40 per cent from the peak. Gold also suffers from the fact it attracts no interest and delivers no dividends. At a time of rising interest rates, therefore, it looks increasingly unattractive when compared with holding cash.”

If you want to buy gold much depends on whether you want access to the price or the metal itself.

Gold bars, gold sovereigns, and the like can be bought and stored. The Royal Mint still strikes gold sovereigns and if you buy British coins you avoid tax on any money you make when you sell them.

Online dealers hold your gold in secure vaults, and it can be easily bought and sold in whatever quantity you desire.

The easiest and cheapest way to invest in gold is through an Exchange Traded Commodity. ETCs are structured as shares, so you can buy and sell them on investment platforms, and hold them in an ISA or a SIPP.

Alternatively, you can invest in the shares of companies involved in the gold business – including miners and distributors.

As always, the caveat with gold is it should only form a relatively small part of a diversified portfolio.