Is Gold Still a Safe Haven? Experts Weigh In
Investing in gold is increasingly seen as a smart move for a balanced portfolio, particularly given global economic uncertainties. John Lowe of MoneyDoctors.ie highlights this shift, noting that gold is now considered “de rigueur” for prudent investors.
The Rising Price of Gold: A Historical Perspective
The price of gold has seen significant fluctuations over the years. From a high of US$850 a troy ounce in 1980 (equivalent to roughly $2,500 today) it now stands at approximately US$5,032 (or €3,878) per troy ounce. This dramatic increase underscores gold’s role as a barometer of global volatility and a store of value when other assets are uncertain.
Why the Current Surge in Demand?
Several factors are driving the current demand for gold. Firstly, the growing economies of Asia and the Middle East, particularly central banks and demand for gold jewellery, are contributing to a surge in purchases. Global gold jewellery sales have been steadily increasing in recent years.
Secondly, private investors worldwide are turning to gold as a hedge against economic and political instability, fueled by ongoing conflicts like those in Ukraine, Israel and Iran. The inherent stability of gold – economies, currencies and countries can fail, but gold retains its value – makes it an attractive option when the future feels uncertain.
Finally, gold supply is struggling to preserve pace with demand. In 2011, over 4,000 tonnes of gold were purchased, but only 2,700 tonnes were mined. While production reached 2,860 tonnes in 2014, it’s still falling by an average of 4% annually, and increasing supply could take up to a decade.
Central Banks are Buying, Not Selling
Historically, central banks often sold gold reserves. This trend has reversed, with countries like Russia, Iran, and China now actively buying bullion. This shift further reinforces the perception of gold as a safe and reliable asset.
How to Invest in Gold: Four Key Options
For those looking to add gold to their portfolio, John Lowe suggests four primary methods:
1. Gold Bullion
Purchasing physical gold, such as coins and bars, is a direct way to invest. A recent transfer of nearly 2,000 troy ounces of gold bullion (worth over €8.5 million) into Ireland demonstrates a growing preference among Irish investors to store their gold domestically, with Dublin vaults gaining popularity alongside established locations like Zurich and Singapore.
2. Gold Mutual Funds
Gold mutual funds offer a cost-effective and convenient way to benefit from gold’s price increases. Funds like the Black Rock Merrill Lynch Gold & General Fund have demonstrated strong performance, growing over 1000% since 1988.
3. Exchange-Traded Funds (ETFs)
Gold ETFs, listed on stock markets, provide exposure to gold prices without the need to physically hold the bullion. The world’s largest ETF, Exchange Traded Gold, holds over 431 tonnes of gold – exceeding the Bank of England’s reserves.
4. Perth Mint Gold Certificate Programme
This program offers secure storage of bullion at the Perth Mint, guaranteed by the Western Australian government. The minimum investment is €7,000, with fees ranging from 2% to 3.9% for purchases and 1.5% for sales.
The Future of Gold in a Cashless Society
Economist Ken Rogoff believes gold will become an increasingly important hedge in a cashless society, describing it as an “extremely low risk asset.”
Frequently Asked Questions (FAQ)
- Is now a excellent time to buy gold? If ‘gold bugs’ are correct, it is a good time to add gold to your portfolio.
- How much of my portfolio should be in gold? A common recommendation is 10% of your investment portfolio in precious metals.
- What are the risks of investing in gold? While generally considered safe, gold prices can fluctuate. It’s important to have a diversified portfolio.
- Where can I store my gold? Options include secure vaults (like those offered by GoldCore), or through programs like the Perth Mint Gold Certificate programme.
Disclaimer: The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
