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Gold’s magic not guaranteed

By Dian Vujovich

Once upon a time gold was the go-to investment pick for portfolio protection when markets were sloppy and the direction of the economy was in question. That precious metals pick, however, hasn’t rewarded investors much over the past few years shedding light on rethinking that old investment mantra of how past performance is no guarantee of future performance.

Local investment professional John Browne, a senior market strategist for Euro Pacific Capital, has been a fan of gold for years. At a presentation in December of 2012, when gold was trading around $1714 an ounce, he suggested to investors that it was a good time to buy gold because its price was still low.

So much for that point of view as gold has been on a price slide downward pretty much since that presentation.

Over the past 52 weeks, for example, spot gold has ranged from a high of $1345.17 to a low of $1,132.16, according to Bloomberg. On Friday, March 27, 2015, it closed about 65 bucks off that low to $1,198.55— about 400 bucks less than in December 2012.

Although there is no denying that gold was an attractive 15 years ago, in October of 1999 it was trading about $291 an ounce, grabbing that kind of 4x price gusto over the coming 15 years (that would be from 291, let’s call it 300 to basically 1200 bucks) will take some special circumstances. Circumstances that include higher taxes and run away inflation.

I’m not sure anyone would argue much with the likelihood that one or both of those circumstances is likely to happen in the future which bodes the question: Is now the time to go with gold?

When we look only at the very short term performance of precious metals and throw silver, platinum and palladium into the precious metals mix along with gold, data from GoldMoney.com shows that during the week ending 3/26/15, silver was the biggest winner gaining over 6 percent to $17.09, gold was up 2.9 percent to $1,204.16, platinum up 2.7 percent to $1,149.49 and palladium was unchanged at $767.03.

Throw the dollar in and the World Gold Council reported on March 26, 2015 in its “Gold Investor” report the following assessment: “Generally, there is an inverse correlation between gold and the dollar. However, our analysis shows that the gold price increases more when the dollar weakens than it falls when the dollar strengthens. In our view, the dollar’s relationship with gold has changed dramatically over the past decades and is likely to shift further as demand moves East and the world moves to a multicurrency system.”

Geez, that sure clears things up and helps investors decide whether or not to take a chance on gold doesn’t it.

Ask me and its all about alchemy and romancing the perceived magical power of this precious metal that over time has paid off for some investors and not others. And, never forgetting that past performance is no guarantee…well, you know the rest.


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