A lot has been said and written about the recent fall in gold’s price.
Gold is an interesting asset.
· It pays a negative return (you need to pay someone to secure it).
· It’s not used widely for industrial purposes.
Warren Buffett observes: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
Gold can only be rationalized as a store of value, an alternative to fiat money that we have all grown so accustomed to. And it tends to perform well during environments of market distress.
As an ‘insurance’ policy during these times of distress, we feel gold has an appropriate place in an investor’s portfolio (less than 3% of total assets). As with any well diversified portfolio, it’s important not to ‘compartmentalize’ any individual holding; focus on how the overall portfolio is performing.