Hold Gold: Insuring Your Portfolio Could Prove Lucrative
The comments below are an edited and abridged synopsis of an article by Dominic Frisby
“Put 10% of your portfolio in gold and hope it doesn’t go up,” says a Wall Street adage. Never has that advice seemed more apt than during the past 12 months. Stocks have been forging ahead. America’s benchmark S&P 500 index is about 40% higher than it was a year ago. The UK mid-cap FTSE 250 has done almost as well. Even the FTSE 100 blue-chip index has jumped by nearly 1,000 points.
And yet gold is down by 15%, and silver by more. A year ago, gold was above $2,000/oz. Silver was testing $30/oz. Today gold is at $1,790; silver is at $23.
They say a rising tide lifts all boats, but gold and silver have both been bypassed in the broad commodities rally.
But if you followed the wisdom of the adage, you’ve done well. Gold was your insurance premium. Everything else went up. Better that than the other way around. That gold hasn’t been appreciating means all other sectors are doing just fine.
You can argue that the growth is illusory, but for now markets aren’t buying it. Gold’s problem could be that the economic recovery is going too well. But to gold speculators, insurance is boring. We want gold going to $2,500 and gold stocks trebling and quadrupling. Still, be careful what you wish for. The inflationary reality of that scenario may not be so pleasant.
Frisby discusses what lies ahead now that inflation is here.