Potential Future of Gold

I’m not in the business of making short-term price forecasts for stocks, bonds, or anything else, including gold. Gold has had quite a run over the last decade. I thought it would be a good idea to take a look at a gold chart from the last time gold had a great run (1970 to 1980). The chart below shows that decade plus a couple of extra years.


Now this might look like I’m predicting that gold is going to crash soon. In fact, I just want to point out that this is a possibility. This shouldn’t be a great concern for those who have a small slice of their portfolios in gold. But for those who are piling into gold with the bulk of their portfolios because of government debt fears, inflation fears, or just bullishness on gold, such a crash is one of the many future possibilities. Diversification is a good thing even when it comes to gold.

Comments

  1. WhereDoesAllMyMoneyGo.comAugust 4, 2011 at 8:32 AM

    Good post. Investors seem to forget past lessons over and over again. I also have no idea which way gold goes from here. And I also am fine with not holding gold directly as the mining stocks in my index funds are influenced by the price of gold anyways.

    ReplyDelete
  2. Steadyhand_chris August 4, 2011 at 10:50 AM

    Thanks for the reminder to not chase performance! very tempting and hard to avoid.

    ReplyDelete
  3. Michael JamesAugust 4, 2011 at 11:12 AM

    @Preet and @Chris: Thanks. The number of come-ons I see about buying gold is getting out of hand.

    @CC: As novice investors learn more about investing, it's interesting that some invest smarter and others just keep doing what they've always done but have smarter-sounding explanations for their actions.

    ReplyDelete
    Replies
    1. Michael JamesNovember 2, 2020 at 10:16 AM

      The second reply above is to Canadian Capitalist's comment:

      It's funny that many investors are now interested in adding gold to their portfolio... purely for "diversification" reasons, you know!

      Delete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

What to Do About Crazy Stock Valuations

Image
The last time I had to put a lot of effort into thinking about my finances was back when I retired in mid-2017.  I had ideas of how to manage my money after retirement, but it wasn’t until a couple of years had gone by that I felt confident that my long-term plans would work for me.  I had my portfolio on autopilot, and my investing spreadsheet would email me if I needed to take some action. I was fortunate that I happened to retire into a huge bull market.  I got the upside of sequence-of-returns risk.  The downside risk is that stocks will plummet during your early retirement years, and your regular spending will dig deep into your portfolio.  Happily for me, I got the opposite result.  My family’s spending barely made a dent in the relentless rise of the stock market. However, stock prices have become crazy, particularly in the U.S.  One measure of stock priciness is Robert Shiller’s Cyclically Adjusted Price-Earnings (CAPE) ratio .  In the U.S...
Read more

Archive

Show more