20 Experts give their view on Gold (Part 1)

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1000kg Gold Bar

There is a continued interest in gold investment among individual and institutional investors. But does it make any sense to invest in gold or is it just an investment in eternity? Can you make any profit from gold these days?

In this first part 10 financial experts give their blunt opinion about investing in Gold. They talk the pros and cons of buying gold, each from their own perspective. Read part 2 here.

1“Gold is an excellent portfolio diversifier”

Jordan Roy-Byrne
 
By Jordan Roy-Byrne – Jordan Roy-Byrne, CMT, MFTA is the editor and publisher of TheDailyGold.com. His work has been featured in CNBC, Barron’s, Financial Times, Alphaville, Kitco and Yahoo Finance — TheDailyGold.com

The benefits of Gold as an investment revolve around its store of value over long periods of time as well as its ability to be an excellent portfolio diversifier at times. Fiat currencies lose purchasing power over time while Gold does not. While Gold may not always outperform cash in the bank over several years it will outperform over decades.

Gold is an excellent portfolio diversifier because historically its best performance has coincided with poor performance from US Stocks. Examples of that include the early 1930s, the entire 1970s and the entire 2000s. Currently, US stocks are trading at near the highest valutions in history. Similar valuations in the past have led to very poor returns. Expected returns for US stocks over the years ahead are expected to be minimal at best.

On the contrary, Gold and gold mining and exploration companies (for the speculator) are extremely useful. We expect precious metals to perform very well over the next 5-10 years.

Jordan Roy-Byrne is the author of the 2015 book, The Coming Renewal of Gold’s Secular Bull Market. You can listen to his podcast dedicated to bringing you insights and views from the brightest minds in Gold and junior mining.

2“Are you ready to let Gold save your retirement assets?”

Michael Tamez
 
By Michael Tamez – Michael Tamez is Investment and Financial Blogger for Sunshine Gold Investments. His goal is to educate people financially, while recommending bright retirement options for financial security — SunshineGoldInvestments.com

Here are my 3 solid reasons why people should consider investing in gold:

Reflecting on the history of humanity, gold has prevailed as a financial hero. Whether used for saving or investing, gold consistently proves its wealth preservation capabilities.

When investing in gold, there is no third-party involvement if you’re buying gold directly from a reputable gold investment dealer. Therefore, wealth in the form of gold bullion can be held and stored anonymously. This allows you to independently secure your retirement investments.

If you haven’t already, here are 3 reasons why you need to seriously consider investing in gold:

1. Gold is a Tangible Asset with Innate Value
Physical gold is real. It’s tangible and indestructible. Compared to paper currency, gold bullion is impossible to artificially create and extremely difficult to counterfeit.

Mining physical gold is a costly, time consuming, rigorous process. For this reason, gold is a treasured asset with innate value, and is prized for being a timeless investment.

Because paper money is printed from thin air, paper money, in contrast to gold, has zero innate value. This is the sole reason why gold has always held its value when paper currencies collapse.

2. Gold is Outside the Banking System AND Independent of the Stock Market
Ironically, in our current era of economic uncertainty, the stock market is at an all-time high. However, what goes up *must* come down. And when it comes down, we may experience the worst stock market crash in history.

Gold is one of the few assets independent of the stock market and banking system. It is not issued by any governments, central banks, or monetary authorities.

Physical gold, if owned and stored in a non-bank safe or investment vault, is safe from central bank corruption and manipulation. It is also independent of the stock market. So even when the market crashes, you will still have your gold investment.

3. Gold Cannot Be Degraded or Devalued
Due to its independent characteristics and unique features, gold cannot be degraded. Gold is generally safe from government scrutiny and political interference.

We invite you to compare this to paper fiat currency. Paper currency is constantly devalued, degraded, and even destroyed by government spending, corporate bailouts, and quantitative easing.

On a survival preparedness note, the average gold investment has outlasted all paper currencies by hundreds, if not thousands of years.

In Conclusion…
When you invest in gold you can hold, you’ll enjoy the benefits of a tried and true method of wealth preservation. Gold offers financial comfort and investment security, especially during times of economic distress.

In conclusion, gold has undoubtedly prevailed as a financial hero. Now, the question is… Are you ready to let the financial hero save your retirement assets?

3“Warren Buffett is not a fan on investing in gold…”

Robert R. Johnson
 
By Robert R. Johnson – Robert Johnson, PhD, CFA, CAIA, CLF, is President and CEO of The American College of Financial Services in Bryn Mawr, PA.
www.TheAmericanCollege.edu

I am not a fan of investing in gold. Unlike stocks that have earnings and dividends and bonds that pay interest, there is no return on gold other than the hope that one can sell it for more than one bought it for — the greater fool theory. Gold is simply a speculative investment, as the price of gold isn’t determined by its intrinsic value but simply by its expected selling price to someone in the future. 

Warren Buffett is not a fan on investing in gold. In a meeting with students at the CFA Institute Research Challenge in Omaha in March of 2011, Buffett explained his rationale concerning gold as an investment as follows: The world’s gold stock is about 170,000 metric tons, which if all melded together could create a cube of about 68 feet per side; the cube would be worth about $9.6 trillion. For that much money, one could buy all the crop land in the United States, purchase 16 Exxon Mobil’s, and have about $1 trillion of walking around money left over. He asked the students which one they would rather have. 

Some investors believe that gold is a safe harbor because the consensus of the market believes that interest rates will rise and that rising rates are bad for both stocks and bonds. Historically, stocks have performed markedly worse when rates are rising than when rates are falling. In Invest With The Fed (McGraw-Hill, 2015), Gerry Jensen of Creighton University, Luis Garcia-Feijoo of Florida Atlantic University and I found that from 1970 through 2013, the S&P 500 returned 16.2% annually when rates were falling and only 6.7% annually when rates were rising. Yet, gold performed even worse than stocks in rising interest rate environments, returning 4.9% annually. 

Key findings from the a forthcoming Financial Analysts Journal study (see All That’s Gold Does Not Glitter) that I co-authored with Gerry Jensen and Ken Washer also serve as a caution to those investors considering investing in gold. Specifically, investors must be very careful how they invest in gold, as the returns vary dramatically. In the study we examined 10 actual precious-metal funds, ranging from traditional mutual funds to the more recently created synthetic ETFs as alternative ways to obtain exposure to gold and other precious metals, our findings indicate that the variation in performance across funds is substantial.

For example, over our sample period, the price of gold advanced by 80.58; however, the corresponding performance of the 10 funds ranged from a low of -44.75% to a high of 76.08%. The best overall return performance was turned in by the bullion funds, and the equity funds had the worst performance. Furthermore, we found that the equity funds also had two other major limitations. They experienced far greater volatility in returns and were ineffective in hedging against extremely negative equity market outcomes, which, for many investors, is the most prominent motivation for obtaining an exposure to precious metals.

We also found that despite what some might view as a relative design enhancement, synthetic ETFs underperform bullion ETFs. Our analysis suggests that there is considerable variation in the ability of the various funds to hedge against inflation, equity market fluctuations, and currency devaluation. 

My suggestion is that investors should limit gold purchases to jewelry and not consider gold investment.

4“Gold has taken its pain and it’s finally in a goldilocks scenario”

Nolan Watson
 
By Nolan Watson – Nolan Watson co-founded Sandstorm in 2008. Watson is a Fellow of the Chartered Professional Accountants of British Columbia, holds the designation of CFA and received a Bachelor of Commerce with honours — SandstormGold.com

We are into one of the longest bull market runs in the history of the modern world and the price of everything is looking expensive, whether it be stocks, bitcoin, or real estate. One of the few things that isn’t expensive and is surprisingly cheap right now is gold. Towards the end of 2018, one of the following two things is going to happen.. Either inflation is going to pick up, driving real rates negative, or we’ll have our first recession in a long period of time. My bet is on the former, but its just a matter of time until we get the latter.

The challenge that central bankers will have is that the whole world is awash in debt, whether it be people, corporations, or governments. Debt to GDP levels are higher than ever and central bankers can’t increase interest rates that much without risking bursting all of the bubbles out there. If inflation picks up, unless central bankers want to see total financial calamity, they’ll be forced to let inflation rise faster than interest rates. This will drive real rates negative and increase the value of gold substantially. I don’t expect that to happen in the first half of 2018, I think it’s more of a latter half of 2018, or early 2019.

The conclusion of this is that if the economy keeps doing well and inflation picks up, gold will do well, and if the economy tanks and people become fearful, gold will also do well. Gold has taken its pain and it’s finally in a goldilocks scenario.

5“Gold makes a useful addition to any investment portfolio, no matter how big or small”

Gainesville Coins
 
By Gainesville Coins® – Buy or sell precious metals at Gainesville Coins, no minimum order, no hidden fees or commissions! Proudly holds a A+ BBB rating 10+ years.
GainesvilleCoins.com

Let’s tackle the drawbacks of owning gold first: Unlike a bond or stock that pays a dividend, gold offers no yield. In other words, you don’t generate income just by holding gold. Moreover, no yield means that when interest rates are relatively high, there is a opportunity cost to investing in gold rather than a yield-bearing asset.

Physical gold is bulkier, heavier, and thus more expensive to transport or store than a purely financial paper asset. The cost of storage leads many investors to choose exchange-traded funds (ETFs) and other derivatives that are backed by gold. However, such investment vehicles only provide the illusion of owning gold without giving you any actual metal.

On the contrary, the benefits far outweigh these drawbacks. Gold is a trusted store of value throughout the world. It has a long historical track record as a stable store of value and is universally recognized as a valuable asset. The widespread trade of gold and global recognition of gold’s value make it a highly liquid asset.

It can quickly be exchanged for cash no matter where you are in the world. Gold is a tangible asset that cannot be hacked or deleted from a digital account. It is protected from systemic risk in the banking system. Gold can provide diversification to a portfolio that already includes stocks, bonds, and other investments. It can help balance out the volatile performance of riskier assets.

The strong inverse correlation between gold prices and the floating value of the U.S. dollar mean that gold provides a hedge against inflation. This means that if the purchasing power of the dollar is falling, gold prices generally rise to cover the difference. Gold bullion can be used to fund an individual retirement account (IRA).

All of these reasons make gold a useful addition to any investment portfolio, no matter how big or small. Most financial advisers recommend that 5% to 10% of a portfolio be held in physical gold as a safe way of balancing an investor’s exposure to risk.

6“Gold should really be a small portion of your overall portfolio”

Lawrence Sorace
 
By Lawrence Sorace – Lawrence V. Sorace, MBA, CFP®, NSSA® is Managing Member and Co-Founder/Owner of Mulberry Lane Advisors in Matawan, NJ.
mulberrylaneadvisors.com

Gold is not an investment. An investment implies that you are foregoing spending assets now in return for more purchasing power later. Since, at the end of the day, gold is a real or hard asset and (over the long-term) will only rise with inflation, investing in gold is 
really speculation. Commodities should really be a small portion of your overall portfolio as a hedge against inflation.

7“You will be rewarded by Time for buying physical Gold”

Bill Downey
 
By Bill Downey – Bill Downey is founder of GoldTrends.net which tracks the turning points for gold and silver based on cyclical and historical price patterns using price channel resistance lines, cycles, trends, and seasonal tendencies — www.GoldTrends.net

My take on the benefits of Gold Investment:

Insurance
You have insurance for your car, your home, your kids, and your life. Do you have insurance for your financial assets? The Central Banks have physical gold and the only purpose has to be for insurance. 5 Percent of your financial assets should be in hard assets such as gold. The average reserve currency shelf life is 75 to 100 years. As USA became the England of the 19th century, odds favor China will be the USA of the 21st Century. The next global commodity consumption shift is moving from west to east and eventually commodities along with gold will most likely be priced in Yuan by 2032.

Liquidity (Global)
While financial instruments have come and gone gold has stood the test of time for preservation of buying power.
—2000 years ago you could buy the best suit in town for an ounce of gold. 
—100 years ago you could buy the best suit in town for an ounce of gold.
—10 years from now you’ll still be able to buy the best suit in town for an ounce of gold.
Gold is a global currency and a hard asset. All other currencies are paper assets.

Physical
Gold is an asset that can be physically in your possession, not a digit in some computer server. In an infrastructure or electrical grid failure, or even an EMP event,  your gold will be in your possession.

Cycles
Paper assets have been the play since 1980 and thus for an entire generation. Odds favor gold will become highly sought after during the 2020-2032 timeframe.

Loss of Confidence in Current System
We are at the point where official corruption is so endemic and extreme that it has become a mistake to rely on official gold reporting of any kind, whether from the CFTC, the CME, the Comex, the LBMA, the World Gold Council, the mainstream media, the government or anyone in between, in conducting market or price analysis, or in forecasting coming gold market developments.

When it comes to the one and only money, gold, we believe the most logical and profitable approach is to simply refer to history, and use common sense. The 5,000 year old antidote not only to financial fraud and corruption, but to the profoundly corrosive and dangerous effects of political fraud and corruption, has been gold. We believe this antidote is now more important than it has ever been in human history.

The Washington, D.C. swamp is evolving from a living, breathing cesspool of out-of-control corruption, into a Silurian breeding ground for epic, highly-evolved evil. We hope the now ceaseless revelations of corruption can at least halt, if not reverse the further spread of this destructive scourge, but history says this never happens in declining empires.

Therefore, we believe that those who honor their basic, common sense instincts to buy physical gold as protection against the consequences of official corruption and evil will be rewarded by Time for doing so.

8“Over the last 15 years Gold vastly outperformed inflation”

Matt Hylland
 
By Matt Hylland – Matt Hylland is founder and investment adviser with Hylland Capital Management in North Liberty, Iowa. His company specialises in assets management and financial planning.
www.hyllandcapital.com

I think it is commonly believed that the primary benefit of gold is that, since its supply in finite, the price of gold will keep pace with inflation and protect the purchasing power of your investment. Over very long periods of time, this has certainly been the case:

There are some stories from the Romans that 1 ounce gold coin could be used to buy a very nice toga, belt and shoes. Today, 1 ounce of gold (about $1,300) would buy you a very nice suit, shoes and a belt…about equivalent attire considering the times. So you could say gold has done well over a couple thousand years in protecting your “purchasing power”.

However, over more reasonable periods of time, like the time frame that you or I are investing or saving for, there is no guarantee that gold will keep up.

The price of gold is subject to speculation just like any other tradable asset. Just look at a few examples from history:

In early 1980 you could buy 1 ounce of gold for around $650. By early 2000 that same ounce of gold was worth less than $300.

This is despite the fact that inflation in the early 1980s was very high (over 10%), and although inflation was tame through the 1990s, it certainly was not negative. Someone looking to protect their money from inflation in 1980 would have done very poorly by buying gold and holding it for the next 20 years.

Over the last 15 years or so inflation in the U.S. has been relatively low, yet the price of gold has gone from the mid-$200s in early 2000 to $1,800 in 2011. Here gold vastly outperformed inflation.

If your plan is to set aside money for the next thousand years, gold is probably a good choice for your savings to retain value. If you have a more reasonable time horizon of 10 to 20 years, there is no guarantee at all that gold will keep your dollars safe from inflation.

9“Over the last 15 years Gold vastly outperformed inflation”

John Polomny
 
By John Polomny – John Polomny is Speculator in the Jesse Livermore mold. He concentrates on finding undervalued and contrarian situations. Equity crowdfunding investor.
actionableintelligencealert.com

The main benefit of investing in gold is that it offers portfolio insurance. Gold is one of the few assets that has no counterparty risk. What I mean as counterparty risk is that once you have physical gold in your possession, you don’t depend on someone else to fulfill a contract or keep a promise for it to keep its value.

That is not true of a bond, share of stock, crypto currency, etc. Those other investments have counterparty risk. It is financial insurance just like you have fire insurance on your house. You hope you never need it, but if the house burns down you are glad you have it.
Ray Dalio (Birch Gold Group) speaks to this in a short video. Notice how the other financial experts snicker when he says he owns gold.

As Mr. Dalio says in the video: “If you do not own some portion of gold, you don’t understand history or economics.”

What are all the draw backs in Investing in Gold?
Gold doesn’t offer a return. There is no interest, rents, or dividends generated by gold. It can be cumbersome to buy and sell (physical gold). ETF’s are easy to buy but introduce counterparty risk. Lastly, it has to be stored somewhere and this can have downsides and costs.

10“Gold is an essential part of any portfolio”

Mark Turner
 
By Mark Turner – Mark specializes in helping American retirees protect and diversify their investments by allocating a small percentage of their portfolios to gold and silver bullion.
GoldIRAguide.org

Gold is an essential part of any portfolio in my opinion, simply because it is the only asset that does well when the dollar suffers. Many studies have shown that in times of financial crisis, precious metals are the only asset class that thrives. Based on this alone, I think all investors should consider allocating a small part of their savings to gold and silver. Kevin O’Leary, like many other investors, recommends 5% gold allocation, as detailed in his book the Cold Hard Truth. Ray Dalio recommends 10%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of InvestaWeb.

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