Mar 12, 2012|
Is gold still a good buy?
It is already up so much. It can't go any higher than this. This is the most common reason people seem to be giving when asked about their gold investments.
Truth be told, the first part of the reply is certainly correct. Gold has been going up not for the past one, two or three years, but has now been on an uptrend for more than a decade. Thus, it is natural for any rational investor to question the yellow metal's rise from here on.
But we have strong reasons to believe that gold may not be done just yet. Not by a long shot. And to know why, we may have to turn to the world's reserve currency as of now i.e. the US dollar. Because it is only if the dollar is on a sticky wicket that the prospects for gold will look up. Otherwise, gold would still have been a third world relic.
So, how do the next few years look like for the US dollar? Not very bright we should say. Just as in the past, the value of the US dollar will continue to diminish with time as the money printing goes on unabated. As a matter of fact, the devaluation of the US dollar could become even more dramatic if the US Fed resorts to drastic steps to push back deflationary forces.
Many people are also worried that should the US economy witness a scenario like that of 2008 when all asset classes across the world headed southwards, then even gold will become extremely vulnerable to a fall. However, as study done by a firm Casey Research shows, even in the crash of 2008, gold ended the year with a 5% gain.
Besides, there has been even more currency devaluation since that time and this makes the case for gold even stronger in the event of a 2008 like scenario.
Thus, with answers to the two most important questions on gold pointing towards a pro-gold environment, it does make sense to start accumulating the yellow metal if one hasn't done it already. Just like other asset classes such as stocks and real estate, the current macro environment also calls for a reasonable allocation towards gold.
We believe that at least 10% of one's total investable assets should be held in gold. Anything less than that and one is not preparing adequately enough for the economic storm that would most likely strike us.
||Rahul Shah (Research Analyst), Managing Editor, Microcap Millionaires has led the team from the front in developing some of our most stringent and rewarding research processes. As per his own admission, the turning point in Rahul's life as a financial analyst came a few years back when he got introduced to the works of Warren Buffett and Charlie Munger. From Buffett, he understood the value of investing in good quality business with powerful moats and strong management teams. Charlie Munger on the other hand inspired him to be a lifelong learner and use mental models in order to arrive at the crux of matters across most disciplines. Rahul firmly believes that in order to be successful at investing, you have to do the big things right and possess a great temperament and a contrarian streak.
More Views on News
Jul 25, 2017
Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?
May 27, 2017
What happens when minority shareholders are short-changed in the normal course of business?
Feb 15, 2017
PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.
Aug 24, 2016
And here's your chance to claim a free copy of this book...
Aug 12, 2016
And Why India's demographic dividend could turn out to be a doubtful debt...
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407