The team begins the podcast by discussing why investors typically like gold in a portfolio. Gold is usually sold by fear. We aren’t talking about gold jewelry, gold collectors coins, but we are talking about the gold that people want in their portfolio as a hedge. People tend to want gold because of its returns, it’s liquid, and they can always get rid of it.
In order to take advantage of gold prices that may run at a non-correlated manner to the rest of the market of stocks and bonds, you have to be ready to sell quickly at the right moment. At the beginning of Covid-19 in 2020, gold and silver were hitting all time highs while the market was pulling back 30%.
If you want to buy gold, the most important thing is to buy from a reputable dealer. Keep in mind that if you buy gold, you will incur custody charges. Gold futures is one way to invest in gold. Another way would be through an ETF that owns gold. There are ETFs that are backed by gold deposits. Jewelry is another way to invest in gold. The jewelry manufacturing industry makes up 50% of the demand for gold in the world.
Gold is based upon supply and demand in the marketplace. It is difficult to predict any sort of expected return scenario from owning gold in a portfolio. The people who tend to make the biggest case for owning gold are gold producers or companies who sell gold.
There seems to be very little effect over holding gold long term, except for the fact that you have reduced yield in your portfolio. If you want to dampen volatility, buy something that pays you income, such as US treasuries. To an equity portfolio, there is really no reason to be adding gold.