All that glitters


#1

Anyone thinking of putting gold, silver etc into their portfolio? Any thoughts on the current/future price of gold?

I believe there is a gold etf on the list but I couldn’t see any other precious metals.

I am thinking of using it as a hedge, keep 10% in gold and dip in and out to take advantage of market movements.


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#3

The up/down movement is what I’m banking on. Allows me to jump between the two products.

It will be interesting to see if anyone has tried this strategy and what the holes may be.


#4

Other than an ETF via Freetrade, I’d recommend Glint… I use it because it is a mobile-only, mobile-first app that comes with a Glint Mastercard too.
Pure convenience that has allowed me to readily enter Gold where I otherwise wouldn’t have before. I have no affiliates or stake in Glint, I just like the product which is currently in live beta.

The big advantage I find is that my Gold is fully-liquid.

https://glintpay.com/

https://www.youtube.com/channel/UCPgEk3jaZ15BSwUTOpcNO0Q


(Vladislav Kozub) #5

Have not tried, but look at the comparison of Gold to S&P 500 for the last 30 years (1985 to 2015):

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The correlation is negative, which is a sign of one going up when the other goes down. But the correlation is very weak, quite close to 0, meaning you cannot rely on this strategy in every case.

I have also highlighted the “crisis” areas (1987 recession, 2001 dotcom and 2008 credit crunch). This is where gold pays for itself to an extent. It goes dowin in late 80s whilst the market goes up, it increases substantially in 2001-2003 when the market is bearish and it goes up in 2008-2009.

The only odd moment is 2010 where both market and gold go up.

Overall, I would not trust gold, market generally outperforms precious metals in long-run, in short run in most cases as well, unless you buy it just before the crisis. But who knows when the crisis will start? Nobody.


#7

Thanks for doing this analysis! Much appreciated. I need to revisit this strategy.


(Vladislav Kozub) #8

If only my manager could call that little spit of mine “analysis”, that is more like a “brief note” :sweat_smile:

@Cgwinning and curiously, gold kept being super-bullish all the time Gordon was in the government (in any shape or form, up to the PM level) until his resignation in 2010. And then gold started stagnating with Gordon’s departure.

I guess they also had reasons: all they saw was 12-years of constant gold devaluation which did not seem to stop and they thought cashing in at that point was wise. Did not work out.


(Philip Parkin) #9

I am using Glint as well, so convenient to be able to spend small amounts of Gold.


#10

You know that the correlation coefficient has a range between -1 and +1 right, where 100% diversification can only be achieved where correlation=-1 between two assets. The fact that the comovement between Gold and Equities is sub-0 is great for diversification. This is basic finance class (which I’m sure you’re aware of).

The point of Gold is that it is a hedge. It isn’t supposed to outperform the Markets so I don’t understand the comparison. If anything, Gold is known as an inflation hedge so it would be more appropriate to make the comparison between cash and gold.

On the point of trust, Central Banks, Governments, Investors at al all trust Gold enough to either use it as a reserve asset or give some weight to it as part of a well balanced portfolio. Why don’t you trust Gold? :thinking:

Finally, investing consistently in Gold at the worst point possible during the last decade still meets parity with cash.



#11

Glad to hear. I don’t use the MasterCard to spend on… but I do like having it as an option. I’m using Glint primarily as a savings account and am looking forward to the launch of multi-currency accounts.


(Vladislav Kozub) #12

I just do not feel like it is necessary nor that it brings value to my portfolio (subjective here).

Cash reserves (except 6-months emergency funds [which I tend to use to buy share dips, I know, bad]) are quite boring and really up to different people’s risk appetite.

I do have trust in the US and Asian market (which is traded on NYSE/NASDAQ partly) and do not really want to mix it with gold as historically it does not prove itself. I do not really fancy diversification for the sake of diversification and hence prefer riskier things long-term as they always tend to outperform anything else.


#13

That’s fair enough and your prerogative.

Edit: It is the very fact that cash reserves are boring and earn a negative real return due to inflation that I’m allocating more of my liquid emergency cash to gold via Glint. Glint will protect my cash from inflation at a minimum or better yet give me a decent return which has been circa 8% per annum on average over the last few decades.

Gold has proved itself historically.


(Vladislav Kozub) #14

Not against S&P 500 in the last 30 years surely. Gold is 120% up and S&P 500 is 630% up.

Even if you got into S&P 500 for the 7 years period just before 1987 or 2001 or 2007, it would have still outperformed gold because the market does produce products/services that drive the value and capital. Whereas gold is only appreciating until there will be an infinite alternative created to replace it.


#15

I’m not comparing Gold return against the Market return :joy: Where have you seen me do this? Please quote me :face_with_monocle:


(Vladislav Kozub) #16

That was your indirect response to what the point of gold is and that it “at least keeps up with inflation”.

Gold was up 120% from 1985 to 2015. Inflation in the UK was up 186% for the same time period


#17

Yes, hence comparing Gold to Cash and not equities i.e. Gold has proved itself historically against fiat money.

For the avoidance of doubt, I am of the opinion that Gold is an inflation hedge of which inflation erodes the real value of money. I’m not comparing Gold to the Markets, I only think of gold as a suitable weight in my overall investment portfolio that I prefer to keep diversified.


#18

This little infographic may benefit of interest:


#20

Interesting study regarding electronic waste - the recovery of gold is becoming so efficient that it is soon likely to be cheaper than virgin mining - https://pubs.acs.org/doi/abs/10.1021/acs.est.7b04909?journalCode=esthag


#21

Meanwhile 70% of mined diamonds are used for industry, with the bulk of the rest in jewellery.

And only 3% of industrial diamonds are mined - most are synthetic. So the amount in jewellery is a tiny fraction.


(Vladislav Kozub) #22

Another things is that gold and uncut diamond is more and more often replaced with artificial materials of similar nature. This brings the cost of electronics and things like drilling down.

At some point, maybe soon, maybe not, these materials will completely replace precious metals in industry and will mainly remain as investment hedge and jewellery.


#23

This is a great article on how Germany repatriated half its Gold reserves from overseas… a fascinating operation shrouded in some secrecy.

“How Germany got its Gold back”: https://www.ft.com/content/4edf00ee-a43c-11e7-8d56-98a09be71849