Should we now have gold in the portfolio, at a time when some say that the yellow metal is just another "lottery ticket?"
Bruno Colmant, a prominent Belgian economist shared his view on this issue with La Libre Belgique.
What are the risks associated with investing in gold?
Buying gold is a useful investment, which, however, is dependent on emergency economic scenarios.
Thus, in the case of a monetary disaster on a national scale, the authorities may impose a ban on converting gold into money. This scenario already happened in 1933 in the United States. If there will be a monetary catastrophe of a larger scale, no one will want to invest in gold because there will be no buyers for this metal.
Thus, gold will lose its appeal as an investment due to lack of demand and possibility of conversion.
Is it worth holding gold in an investment portfolio? Is this a good idea?
Of course, this is an asset that should be in a broadly diversified investment portfolio. The share of the yellow metal to a common set of investment vehicles should not exceed 10-15%. It is better to give preference to physical gold in the form of small bars or gold coins – these are easier to sell.
Physical gold is preferable to paper gold in the form of shares issued by exchange traded funds (ETF) or gold mines: there is an additional stock exchange and production risk associated with the qualitative potential of the mine and processing costs.
Owning physical gold, has it a fetishistic aspect?
Well-known British economist John Maynard Keynes talked about gold as a barbarous relic. Of course, owning physical gold has a distinct sensual aspect. But it is a capital investment, which is a wise diversification of assets.
Is the yellow metal still a safe haven investment?
Investing in gold is particularly justified in a period of inflation. The yellow metal is an investment tool that provides very good protection, as in the case of inflation the price of gold increases. Inflation will continue to occur as a result of expansionary monetary policy on both sides of the Atlantic.
In addition, gold is a good investment haven, for example, in case of possible geopolitical problems in the Persian Gulf.
Meanwhile, the price of gold continues to fall against the strengthening of the dollar, which makes the precious metal more expensive and less attractive for holders of other currencies, according to data coming from stock exchanges. The yellow metal is now trading below $ 1,400 per ounce.
Gold is generally regarded by investors as a more reliable alternative to volatile currencies and corporate equities subject to severe fluctuations. This precious metal was rising in price for 12 consecutive years. However, in 2012 its growth was the lowest in the last four years - 7%. Last April, the price of gold fell by 7.8%.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
