Gold is a mysterious metal but it is in buy territory now, says Mark Matthews, MD, Julius Baer.
The first port of call in any uncertain market is to buy gold. In this low yield environment, gold, which historically has given you the best returns and is the best hedge against inflation has been a massive underperformer. Has the definition of how you invest in gold changed? Is gold no longer the go to hedge?
Well it is. It did very well last year because of the coronavirus pandemic. And I cannot say whether the coronavirus pandemic is coming to an end or not, but it looks like it is and in the large western economies. Therefore the fear factor that was imbued in the gold price, has come out of it. It is a very difficult asset to value. How do you put a price on it? It just sits there and does not do anything. But clearly going back to before even history, human beings have been in love with gold. It just has something very particular about it, that copper or platinum or silver do not have.
The first port of call in any uncertain market is to buy gold. In this low yield environment, gold, which historically has given you the best returns and is the best hedge against inflation has been a massive underperformer. Has the definition of how you invest in gold changed? Is gold no longer the go to hedge?
Well it is. It did very well last year because of the coronavirus pandemic. And I cannot say whether the coronavirus pandemic is coming to an end or not, but it looks like it is and in the large western economies. Therefore the fear factor that was imbued in the gold price, has come out of it. It is a very difficult asset to value. How do you put a price on it? It just sits there and does not do anything. But clearly going back to before even history, human beings have been in love with gold. It just has something very particular about it, that copper or platinum or silver do not have.
I feel that the gold price should bottom at about $1600 or thereabouts and it would be fine to start buying some now if you do not have any. The reason being that the central banks of the world are still going to keep policies loose and governments in the western world are starting to engage in a lot of fiscal stimulus. Gold is a mysterious metal but it is in buy territory now.
