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Gold is generally regarded as a safe investment in troubled times and when volatility hits the markets, investors often rush to shift funds from equities to gold. It is essentially seen as somewhere to store wealth when other asset classes appear risky. Of course that doesn’t mean that it can’t lose value just like any other asset.
As ever, the gurus at our investment partner, Tilney Bestinvest, were ahead of the game and began investing in gold last year. At that time, they were swimming against the tide given that in July gold hit a five year low and expectations were that its value would continue to drop. The outlook still looked gloomy as recently as December. But what a difference a few months makes! Gold has shown a return of 28% since the beginning of the year and analysts are predicting further rises.
TBI’s ability to predict the market comes from a mix of experience and research. Chief Investment Officer, Gareth Lewis and his team have a wealth of both. They foresaw issues with China and predicted that the exceptional growth rates seen in the country could not be sustained. In addition, they were aware of the possibility of asset bubbles caused by excessive global liquidity bursting. This continues to remain a threat as the Bank of England has just announced more quantitative easing, aka ‘money printing’. With negative interest rates becoming a real possibility, some are predicting competitive currency devaluation across major currencies which will only lead more investors to seek safety in gold.
Investments in gold can generally take one of two forms: either by investing in shares in companies who mine the precious metal, or by purchasing exchange traded products based on the actual price of the underlying metal. The latter tends to be a less volatile option and is the one generally favoured by TBI who have predicted that they will add more gold to their portfolios in the near future.
As ever, it is important to stress that while there is a place for gold in your portfolio, the best policy for the majority of investors is to maintain a well-balanced and diversified portfolio which is in line with your investment goals and time horizon.
If you’d like to speak to one of our financial advisers about investing in gold as part of a diversified portfolio, all you need to do is pick up the phone or drop us an email!
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