Take a look at gold now, while it is less shiny

2014-10-22 00:00

DURING 2010 and 2011, one of the most common questions I received from readers was “how do I invest in gold?”.

At the time, gold was trading at an all-time high, having had a bull run which saw the gold price rise from $1 000 per ounce to nearly $1 800 in just two years — a 125% return.

Then the run came to an end and since 2012, gold has been sliding downward, trading today at around $1 200.

The decline has been less dramatic in rand terms due to the weaker currency, but even rand-denominated gold returns have been flat over this period. Anyone who bought into the hype of three years ago would have been very disappointed in their return.

Not surprisingly, we have had no questions from readers about investing in gold recently, yet it is now, when gold is not shining, rather than after a strong bull run, that one should be investigating gold as a possible investment.

Scott Winship, portfolio manager at Investec Asset Management, wrote recently that it may be time to consider going back into gold.

Last year, globally investors were sellers off gold but this year has seen a change in sentiment and investors have slowed their sale of gold exchange-traded funds.

There are signs globally that inflation is picking up and gold has historically proven to be an excellent hedge against inflation.

Winship points to research by Goldman Sachs, which suggests a 91% correlation between the U.S. inflation rate and the U.S. dollar gold price over the past decade.

Historically, Geopolitical risk has also been positive for the gold price, as investors seek safe havens in times of political turmoil. Escalating tensions between Russia and Ukraine, as well as increased violence in the Middle East and the emergence of Isis (Islamic State of Iraq and the Levant) are all positive indications for gold. Winship says the tensions in the Middle East will also affect the oil price and over the long term, the gold price has traded at about 16 times the oil price. Winship says today that relationship is just shy of 12 times and arguably represents value for gold if oil remains at these levels.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24


Man scores date with tennis superstar after Twitter bet

It’s a modern day Cinderella story, but one American man took ‘shoot your shot’ seriously in 2017.


You won't want to miss...

Who are the highest paid models of 2017?
10 gorgeous plus-sized models who aren't Ashley Graham
5 top leg exercises for men
10 best dressed men of 2017
Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.