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Thread: Buying Gold

  1. #1

    Buying Gold

    Hi All,

    I'm looking to invest in a gold/ETF or possibly physical gold for the following reason:
    I don't own any inversely correlated assets and never have done. (I'm only 20 and setup my account earlier this year and did not see any value in owning gold long term being what you would consider a 'growth investor'). However Post Brexit, despite gold's rally, I believe it might be worthwhile to invest about 10% of my portfolio in gold for a number of reasons (and probably buy in USD due to the inverse correlation the two assets generally have; I'm a euro earner and the EURUSD rate is relatively flat at the minute).

    1) The US Presidential election. Regardless of the result but especially if it was Trump, I can see a short-medium term gold rally post election. There will have to be a wave of uncertainty post either candidates election and I can't imagine a scenario where gold does not gain.

    2) Increase USD exposure. Most of my PF is in UK and EM stocks; I definitely do not want to buy US stocks at their record highs but I think it may be beneficial to own some USD. If gold does rally after this scenario then we would have to assume the Dollar would fall. So I would realise my gains in USD and then invest in what is hopefully a more affordable US stock market.
    If this scenario does not happen and it is the complete reverse, USD gains and gold falls, then I would not lose a huge amount as my USD is getting stronger against the EUR.

    Is anyone else considering buying the dips in gold leading up to the election? Presumably most of you would not really consider switching your GBP to USD at the minute as I said before due to the lower rates, but it could still be beneficial buying some gold in GBP.

    What the Fed do tomorrow is also key to Gold and the USD. A planned rise will obviously lead to lower gold and rising USD so I'll be listening to whats been said tomorrow with a keen ear.

  2. #2
    Well it's a tricky one because a rise may signal inflation, which may be good for gold over the slightly longer-term ... I think either way, there are good reasons for holding gold – I'm about 5% having taken some profits after the rally, although gold equities were the real killer trade this year, which I reduced about 2 weeks ago

    I think Credit Suisse see gold over $1,470 (ish) by December, but personally I use technicals to at least tell me whether or not it's a good time to buy or sell (fundamentals tell you whether you should buying or selling, and technicals tell you when)

    Useful site for a quick reference:

    I tend to use 'Daily' as my main 'yes' or 'no' signal, then I might go down to hourly or smaller just to wait till they all say 'yes' ... You won't be missing out on any gains when they don't, and it helps avoid mistakes when your fundamental perspective is just plain wrong (which is probably about half the time in my case)

    Personally I use BullionVault ... I think it's fantastic ... So cheap to deal and trade, I make small moves all the time ... 24 hour trading was also very useful around things like the Brexit vote ... I was able to buy into a rally between 11pm and 5am, as the result became clearer

  3. #3
    Gold as an investment: most consider its value as insurance against unforeseen disaster where currency assets fall in real value. As such, to go in at 10% of total investments is on the high side.

    US$: a safe haven currency. Subject to your current holdings I would not reject US shares via a S&P 500 tracker.

    /$ exchange rate: I would not wait. The may well fall further. That is the very situation when you would be grateful to hold gold.

    Method of holding: an ETF holding physical gold e.g. SGLD. If you fear a collapse of financial markets, or confiscation by a communist government, consider holding physical gold stored in a safe place E.g. Canada. See Bullion Vault and others.

  4. #4
    Yeah I agree with everything you say. That's exactly why I will probably buy gold in USD (they are generally inversely correlated as is USD and oil) over the next few weeks at the dips in prices. 10% of my investments at the minute is not a huge sum so and I plan to invest much more over the coming years so I feel I may aswell put an extra bit into gold now.

    I hold practically all of my cash in EUR so a fall in the /$ does not affect me at all. They only chance of a major EURUSD fall would be due to a fed rate rise which we'll have to wait and see with that one.

    Can I ask what you mean by a collapse in financial markets affecting my gold holding in an etf? Most gold ETF's are backed by the underlying which means if the issuer of the ETF goes bust you can excercise the right to the underlying, i think anyway; at least thats the way it works with stock ETF's for sure.

  5. #5
    I'm with Law Man here. I have 5% gold in the form of Sovereigns. These are were bought in about 10k batches in 2013-2014, so I am only just about above water in terms of value. But that's not the point. I bought these as insurance against currency destruction by Central Bankers, inflation hedge, and inverse correlation as you state.

    If markets drop 50%, I expect Gold to shoot up by far more inversely (if you know what I mean), and when hyper-inflation finally hits, (which it will when those good old Central Bankers and politicians really lose the plot and start to confiscate our savings that they can get at), then sovereigns and half-sovereigns will once again become the only trustworthy currency!

    No, I've not started stockpiling tinned food and shotgun cartridges - yet, but I sleep just a little bit more soundly knowing I have a few tens of thousands no-one can get at.

    Each to their own I guess! Oh, personally I'd stick with the physical stuff you can hold in your hands, not ETFs, shares etc.You just never know when you might need it, and by then the "authorities" can put all manner of restrictions on redemptions etc.

    PS Good on you for starting this way of thinking so young. Wish I'd had your intelligence when I was 40, never mind 20!

    Best of luck in what ever way you decide to go.

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