Tag Archives: Gold

Gold as a Part of Portfolio

From time to time we get a request from our clients and potential clients regarding investments in gold.

In our view gold isn’t the best investment as it isn’t generating any return. Yes, it’s been able to sustain it’s purchasing power though in very long time periods, we’re talking about decades and centuries.

Furthermore, gold is quite volatile and thus investor may lose some part of their investment. Gold’s performance has varied year by year. Picture below shows that gold had a real drawdown that lasted 32 years. Are you willing to hold an asset that is underperforming other asset classes and losing money by itself?

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Watch Out Below – Gold Edition (#3)

If you have been following our blog, then you will have no doubt noticed that we have not been big fans of investing in gold and gold related securities.

On August 31st, we issued our first warning salvo:

LINK: Watch Out Below – Gold Edition


We followed up our initial commentary a couple of months later:

Watch Out Below – Gold Edition #2


Our thesis remains in tact.

Here is a chart of the price of gold. Gold if off over 10% from its highs, and from a technical perspective it stands on a precipice. The 50-day moving average is about to cross the 200-day moving average. This is a damning, bearish event for something that trades purely on sentiment:

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Watch Out Below – Gold Edition (Update)

Here is how the price of gold looks after yesterday’s sell off based on what is perceived to be a more hawkish stance (more likely to raise rates) by the Fed:


I was recently asked by the Latvian finance magazine ‘Kapitals’ what I thought of gold.

My response was as follows:
“The market is waiting for the Fed to act. If inflation continues to grow, the Fed will increase rates. In turn, if rates increase, the price of gold will decrease. The previous period was successful for investment in gold. Nevertheless, the gains could be lost quickly. Gold does not produce anything; it does not bring an extra return and requires you to cover storage costs. Besides, assets that may decrease in price by up to 40% cannot be classified as either risk-free or reliable,”

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Watch Out Below – Gold Edition

The increased likelihood of interest rate hikes this year by the US Fed has been damaging to gold. I would expect this to continue.

Here’s a one year chart of the price of gold. As you can see, gold has traded off over 4% from its recent highs and has traded through its 50-day moving average. Moreover, it looks like it will be testing its 100-day moving average at around $1300 – another important psychological level:


Silver is faring even worse. It has lost almost 10% from its recent highs:

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