Monday, May 12, 2014

Gold - was the land of promised - a myth maybe

Some years back, many people including myself were all hyped about gold. Many said it is the THE hedge againt inflation - e.g if 50years back you could buy say a camel with an ounce of gold. Supposedly after 50 years you can still buy a camel with 1 Oz of gold. This seemed very true while the gold price was going up.
My previous write up is here : Gold, Oil and you.

Well if you look at the below chart which I've taken 10years back to date of posting - this statement seems rather true up until probably 2012.

gold price charts provided by

But from 2012 to 2014 as below, you will see it has fallen from a peak of ~USD1,800 to ~$1,300 per Oz. And no, I don't think neither the price of camel or any other things you'd measure inflation against has fallen by that much. That is a ~27% drop in 2 years. Year from 2005 (and prior) gold has risen, and steeply getting from 2007-2012. But my opinion is making a statement gold is a hedge (guarantee) against inflation is not true. Now if you take maybe a 50year average this might be true, but remember if you jumped into the gold frenzy in 2012 buying up a lot of gold, you might feel the pinch now.

gold price charts provided by

So what's my thoughts? I think as other items like stocks, property, FD - Gold is a good commodity to place in your basket of investments, to even out the risk. One of the latest buzz going on is when there is un-certainty in the world - e.g war, economic turmoil etc, gold will rise. I am not sure I see this co-relation 100% of the time. But if this works out, e.g when stock markets go up, gold goes does, and IF gold goes up when markets crash - then having gold in your basket of investment is a good hedge against being too heavily invested in the market.

There is another option - investing in gold / mineral mining companies via ETF or unit trust - e.g AmPrecious - my experience - it is even more volatile then gold, as it depends on gold prices and local factors - cost of mining, strikes, etc. Probably when time is good, it goes up to, but I'm guessing when gold drops, it will drop at least similarly or worse.

Well that's my two gold coin cents on this topic.

ps - if you are reading this entry - how do you like the formatting of this site vs my more active site fyi-penang?