Forbes.com recently detailed a trio of reasons why savvy investors need to always own gold in their portfolios.
Essentially, you can never play it too safe when it comes to investing.
“Holding an overweight position of an unlevered asset with limited supply such as gold will offer one of the few safe havens for capital preservation,” Forbes.com contributor Katina Stefanova explained.
“Gold’s biggest attraction is that it maintains or even appreciates in value consistently and acts as safe-haven during market risk-off periods. Because of gold’s perception, it is not evaluated in terms of dividend yields and cash flow distributions, but instead by analyzing quantifiable macro factors related to world growth prospects, liquidity (interest rates, USD), with an overlay analysis of the market environment,” Stefanova explained.
Three reasons why gold is poised to beat bonds and other equities:
1. Longer-Term Growth Expectations
“Gold tends to perform well at the time of prolonged equity corrections driven by changes in the growth environment,” Stefanova explained. “Over the very long-term, gold can benefit from wealth creation, especially in emerging markets, where allocation to gold as a percent of GDP remains low. The rise of disposable income has risen in emerging markets over the past several decades and has led to an increase in financial assets and gold being held by households.”
2. Investment Alternatives
“When the U.S. dollar starts to lose value, investors look for alternative sources to store value, other fiat currencies and gold. One must acknowledge here that the reasons for the moves in the US dollar are often related to interest rate differentials. When US interest rates decline versus other currencies, carry in the alternative currencies becomes more attractive or if there are no better “safe” carry alternatives, investors flee to gold,” Stefanova explained.
3. Political Uncertainty
“Rising political uncertainty and a deteriorating fiscal position in the US meaningfully revives the debate of the US Dollar as a reserve currency. This in turn, could drive further allocations to gold and alternative reserve currencies in Central Bank portfolios,” Stefanova explained.
Meanwhile, investment guru Bert Dohmen also recently predicted that gold will continue to soar in price for the next decade.
“Gold and silver are not hedges against a crisis. In fact, a crisis may cause all salable assets, including precious metals, to be sold in order to get cash,” Dohmen wrote for Forbes.com.
“Gold investors must realize this to protect themselves in times of crisis. Cash in the form of a stable currency is the most desirable asset to hold during such times,” wrote the president of Dohmen Capital Research Insist, Inc.
“What is bullish for gold? My opinion is that gold is primarily an inflation hedge, actual inflation or the perception of future inflation, as currencies are debased by governments that can’t pay their bills,” he said.
“With long-term bullish sentiment on the precious metals so low until late 2018, and the gold price in terms of many foreign currencies already near or at new record highs, it’s only a matter of time before the U.S. dollar price of gold shoots upward,” he wrote.
Dohmen isn't the only respected economic voice touting the benefits of gold.
Newsmax Finance Insider Jared Dillain recently suggested that all investors should have gold in their portfolio in any way possible.
"Add gold to any portfolio (including gold mining equities) and the risk characteristics improve," he recently wrote.
"There’s been a big shift in the Fed’s thinking in the last couple of months. Big… as in, really big… as in, dramatic. At least partially because of the political pressure," he wrote.
"Off in the peanut gallery, you have this whole discussion on Modern Monetary Theory and how deficits don’t matter. Gold likes those kinds of discussions. Plus, central banks are buying it for the first time in a while," he wrote.
"There are also not a lot of gold discoveries out there, and the existing ones are in unhappy places that are hard to get to. The fundamentals of gold are lining up for the first time in a while. I am not the first to observe this. I think people are being very conservative about their gold forecasts, after being burned pretty badly the last time," he wrote.
"I’m bullish, I own it. I think other people should own it, maybe with a bit of risk management this time around."
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