20
October
FT Video on Gold - Gold & Silver Investments' Flood Interviewed
In a very interesting video about the gold market today, Stephen Flood of Gold and Silver Investments is interviewed by Javier Blas of the FT . In ‘Time for the Midas touch?’, the commodities correspondent of the FT, Javier Blas looks at the issues surrounding gold investments in the current economic climate.
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Javier Blas is right to warn that the party is normally over for an asset class when the retail investor arrives to the party. Meaning that when an asset class is being invested in by the mainstream public in a very significant way as seen in the Nasdaq bubble and recent property bubbles internationally, it may be time to be wary and either sell or reduce weighting to that asset class.
At the same time, it is important to remember that gold remains a fringe investment at best with a tiny, tiny fraction of the western investment public having invested in physical gold bullion.
We are a long way from mass mania and the mass participation associated with market tops (as seen in stock and property markets in recent months). Most investors do not know what gold bullion is or how to invest in gold. Gold is featured in the mainstream media extremely infrequently and even then it is often featured in a biased and sometimes inaccurate and unfair way.
When gold is featured on a daily and even weekly basis in the daily newspapers in a very positive light and there are supplements dedicated to investing in gold and precious metals and there is a mainstream opinion that “you cannot lose with gold” or “gold always goes up in the long term” then it will be time to sell or at least go underweight gold and silver.
Joe Kennedy’s shoe shine boy and the man in the street and most in the financial services industry itself are barely aware of the importance of diversifying into gold – when they are and we do have mass participation in the gold market it will be time to go underweight gold.
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Thanks for the comments
Thanks for the comments GoldWize.
Regarding your question:
I think what type of gold/silver investment is right for you depends on your risk appetite as well as your view of the future. The general consensus seems to be that being overwieght in precious metals is a good idea at the moment, and my view is that it never hurts to have some physichal (coins, bars) incase the unthinkable happens. Just recently when AIG got a Fed bailout of $85bn, trading was suspended for a number of ETCs (commodity based ETFs such as gold, silver ETFs). This shows the huge gulf in risk between physichal and 'paper' gold.
The stand-out attribute of gold/silver that makes it such a great 'safe-haven' is that there is no counterparty risk, once you own it, its yours, and the markets don't have to work for it to have a value.
On the other hand, if you don't like the idea of storing bullion yourself, there is The Perth Mint Certificate Programme which is a way to get some exposure to physichal gold without the hassles of delivery or storage.
Ed, Thanks for highlighting
Ed, Thanks for highlighting Javier's video. I've been telling my associates that gold is the key to staying safe during these times of uncertainty. After all history has indicated, that as the market behaves manic, and counters true fundamentals, we tend to run to gold to hedge our cash.
From Econ 101, we've learned that as the money supply increase, coupled with large declines in interests this is usually the best conditions for inflation. Given that our fiat currency WORLDWIDE is no longer pegged to gold, we are all left wondering if history will stand true to the past. The analogy of being able to afford a good suit of men's clothing with an oz of gold appears to also hold significant merit. With the price of gold today, and the declining prices in retail, i'm certain one could afford 2 good looking suits and still have change over for a quick lunch. My question is.. is coins? bullion? or gold ETF's the right direction for investors? Are we on the begining rise of the gold boom? or is it long deflated as the housing bubble. (no pun intended on the "long deflated" comment) ;)
Just my 2 cents, I mean 2 oz's