The precious metal often called an “inflation hedge” and better known as a “safe haven” looks lackluster.
He went (GC = F.) is 23% off its March peak, and down 10% year-to-date.
In our series, What to Do in a Bear Market, we asked experts to tell us if there is value to holding gold in this environment.
Why hasn’t gold performed better this year?
First, with major central banks around the world tightening their policies, it has helped send bond yields to multi-year highs. Return-seeking investors were better off holding government bonds for a guaranteed return than holding zero-yield assets like gold,” FOREX.com Yahoo Finance.
Secondly, the rise of the US dollar severely affected all major buck-denominated assets, including gold. Potential buyers who earn in foreign currency have to pay more and are therefore not encouraged to invest in gold.
Should investors keep gold in their portfolios, and if so, what is its price?
This is where fund managers and strategies really differ.
“We do not recommend a fixed allocation to gold unless investors are willing to speculate on currency rates or have some other short-term bullish argument that could drive gold higher,” Jay Hatfield, Portfolio Manager at InfraCap Equity Income Fund (ICAP) ETF for Yahoo Finance.
Rob Haworth, senior investment analyst at US bank Wealth Management, generally recommends “little or no portfolio exposure to gold or metals in light of price volatility and the absence of a steady income stream.”
“Investors may consider very modest exposures if they are particularly concerned about the trend in the US dollar’s value reversal, which could increase inflation pressures and support gold prices,” Haworth said.
Others support small exposure in the portfolio.
“Overall, although the situation of each investor is unique, we believe that allocating 3-5% to gold products would seem an appropriate size to take advantage of the benefits of holding gold as an asset class,” says Imaru Casanova, Vice Portfolio Manager/Senior Gold Analyst. VanEck
Mohit Bajaj of WallachBech Capital told Yahoo Finance that he is a “big proponent of permanent allocation of all types of assets across the board. Anywhere from 5-10% … should be more than enough.”
For investors who want to hold the yellow metal, which is better: physical gold or paper gold (investments that cover gold ETFs)?
Some experts raise safety and storage concerns when it comes to physical gold.
Louis Navilier, founder and chief investment officer at Navellier & Associates, told Yahoo Finance that he doesn’t recommend physical gold, but he does have advice for those who insist on holding it: “Coins are overvalued, so Credit Suisse bars are usually sold at smaller tokens.”
As for ETFs, Navellier says, “I don’t recommend gold ETFs, because I don’t like paying ETF spreads.”
But Bajaj of WallachBech recommends SPDR Gold Shares (GLD), “if you want access to gold without having to actually buy the metal.”
GraniteShares Gold Trust (ribbon“It’s another thing we’ve seen a lot of strong demand,” Bajaj said.
“From a price point of view, it’s only $16 or $17, so for those novice investors who want to get their feet in the space, they can buy that without spending a lot of capital,” he added.
Enas is the Markets Correspondent at Yahoo Finance. Follow her on Twitter Tweet embed
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