The enduring popularity of gold as an investment has to do with its tangible nature. Unlike a stock or a bond, you can feel and touch golden coins and larger ingots. The problem with such tangible assets, of course, is that there is nothing alive about them; that is, there is no claim on the fruits produced by the labor of thousands of workers, in the form of dividends or growth of the enterprise. As Warren Buffett famously pointed out, if you owned all the world’s gold, you could mainly polish it and admire it in your front yard.
Even so, with all the uncertainty in the Middle East, Brexit and the tumultuous U.S. election, investors piled into gold this year, and have been rewarded with roughly 18% returns so far. Alas, they are now learning that gold is one of the most volatile of all assets. Prices have fallen dramatically in the last month, including a 4.5% drop in one week alone. (see chart)
Experts are saying that if the Federal Reserve Board raises interest rates, that could trigger a further plunge, since investors could park their money in relatively safe investments which (unlike the recent past) paid returns. Gold was competitive with bonds when bonds (like gold) were paying nothing. We may be about to see what happens when there’s a difference in yield.
Sources:
http://www.bloomberg.com/news/articles/2016-10-07/gold-set-for-biggest-weekly-loss-this-year-before-u-s-payrolls
http://finance.yahoo.com/news/gold-slips-dollar-strength-two-012206096.html
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
About Objectively Speaking
Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options.
Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors.
Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses.
A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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