August 4, 2016
While the market has recovered nicely from a bumpy first quarter many people still have feelings of uncertainty. The uncertainty I hear the most about comes from the June BREXIT and the potential outcomes of the upcoming November election. While the BREXIT was simply an event that should not have a meaningful long term effect on financial strategies and the election outcome's impact on markets is like a crap shoot, naturally uncertainty can cause people to seek "stable" and "reliable" investments.
If you listen to media in any form you likely hear advertising about gold as an "ultimate safe haven" and "gold is the only currency in the world". And to the marketer's credit, gold is having a great year. It is up over 25%.
However, appreciation does not mean investors are immune from volatility. In fact gold can be just as volatile as stock and I would not bet that gold will continue to be up 25% every year.
In fact, the historical performance of gold proves its volatile nature. In August 2011 gold hit $1,900/oz. Today gold is approx. 30% lower yet the S&P 500 over the same period is up approx. 80% higher. According to this recent article, since 1926 the inflation adjusted return for gold is only 1.4% and the average stock return over that same period is just under 7%.
This is not to say that gold is a bad investment or doesn't have a place in a portfolio.
It is important to work with your advisor to understand what to expect from an investment in gold. There are risks when investing in gold that are not always apparent in advertisements; gold should not be considered a "safe haven" though it may be marketed as such.
With all the facts at hand, and as with most things in life, gold in moderation can be a reasonable and suitable investment.
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).