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09 Jul | Is it Time to Hold Gold?

Since peaking at near $1,800 an ounce in late 2012, gold has given back most of the gains it has put on since 2009. Whilst long-term gold bulls may be keeping their opinions to themselves for the moment, I’d bet my hat they’re also planning an entry back into the market when things level out.

I’m not going to proffer an opinion on the short-term direction of gold, it’s certainly not something I’ve had too much luck with of late. Although using the one year chart below as guidance it don’t take Buffet to figure the current short to mid-term trend.

12 month gold chart courtesy of SharePrice.co.uk

12 month gold chart courtesy of SharePrice.co.uk

But trends are just that. At some point they change. Otherwise they’d be called directions….and investing would be simple.

In the past when I’ve invested in gold it has always been via one of two vehicles.

1. I’ve invested in a gold-mining company or;
2. I’ve taken out a cheeky spread bet or a contract for difference on gold.

Let’s take a quick look at those two options.

By investing in a gold mining company you certainly can reap the rewards of an increase in the price of gold. At the same time you’re at the mercy of company policy, performance and a host of other non-gold related factors. The price of gold can be on the rise but if management are spending more than it’s worth getting it out of the ground, then you’re in a spot of bother (take a bow Norseman Gold). In a perfect world you’d jump in with a well-run junior-gold-miner just before they strike it big in a market that’s about to enter a long-term trend northwards. If you manage to stumble upon that particular investment Utopia, please feel free to drop me an email nice and early on in the piece.

Investing on margin is a double-edged sword. When things are good, they’re very, very good but when things turn sour…..

For a pure gold investment, maybe holding the real thing is an option that should be considered. For one, it takes away the fallible human component of investing in a mining company as well as removing the euphoric highs and the suicidal lows of investing on margin.

Today there’s no need to physically hold the gold personally – no need to reinforce the sock drawer. There’s a number of companies such as goldbroker.com who – for a fee – will keep your golden cache nice and safe for you. You could probably even organise visiting rights if you gave a little notice.

With gold visiting levels below $1,200 an ounce recently, maybe that gold-investment window is again just starting to open.

Paul
rsvp@investorsoiree.co.uk