Gold

nickyhellard

With such low interest rates is it worth investing in gold? If so how? What are the pitfalls?

shaun_from_Africa

nickyhellard wrote: »

With such low interest rates is it worth investing in gold? If so how? What are the pitfalls?

The possibility of the price dropping from its current £1034 an ounce back to where it was this time last year (£707 an ounce) or even lower would be one of the major pitfalls.

dunstonh

What are the pitfalls?

no income generation and its a volatile pricing (lost 35% over 4 years and could lose a lot more potentially). In real terms, over the last one hundred years there has only been one period when it is has been higher in price.

It is a fear asset. It goes up in value when there is fear and down when their is optimism.

The boat has been missed

Eric_the_half_a_bee

dunstonh wrote: »

The boat has been missed

Would it be fair to say the OP missed a golden opportunity?

jimjames

nickyhellard wrote: »

With such low interest rates is it worth investing in gold? If so how? What are the pitfalls?

If low interest rates are an issue for you why would you move money into something that pays zero income?

Surely you'd look to use investments instead where you can get around 4% income

nickyhellard

Thank you one and all.

EdGasket

With gold you are betting that in times of inflation or hyper-inflation, your buying power is maintained while cash becomes worthless. It is very volatile though and by no means tracks inflation closely. Also gold goes up whenever there is a crisis like a threat of war or some financial upheaval like the credit crunch. I like to have 5 to 10% of my wealth in 2 X leveraged gold; it did very well on brexit due to the uncertainty and the fall in sterling.

masonic

EdGasket wrote: »

I like to have 5 to 10% of my wealth in 2 X leveraged gold; it did very well on brexit due to the uncertainty and the fall in sterling.

Just out of interest, how do you get that exposure? Presumably not through a leveraged ETF.

EdGasket

masonic wrote: »

Just out of interest, how do you get that exposure? Presumably not through a leveraged ETF.

Why not? There are 2X leveraged ETFs out there but I use SPGP which is roughly 2 x leveraged to the gold price. Its a gold producers fund so benefits from their dividends although it is non-distributing.

masonic

EdGasket wrote: »

Why not? There are 2X leveraged ETFs out there but I use SPGP which is roughly 2 x leveraged to the gold price. Its a gold producers fund so benefits from their dividends although it is non-distributing.

See http://www.investopedia.com/articles/exchangetradedfunds/07/leveraged-etf.asp

Leveraged ETFs, like most ETFs, are simple to use but hide considerable complexity. Behind the scenes, fund management is constantly buying and selling derivatives to maintain a target index exposure. This results in interest and transaction expenses and significant fluctuations in index exposure due to daily rebalancing. Because of these factors, it is impossible for any of these funds to provide twice the return of the index for long periods of time. The best way to develop realistic performance expectations for these products is to study the ETF's past daily returns as compared to those of the underlying index.

For investors that are already familiar with leveraged investing and have access to the underlying derivatives (e.g. index futures, index options, and equity swaps), leveraged ETFs may have little to offer. These investors will probably be more comfortable managing their own portfolio, and controlling their index exposure and leverage ratio directly.

Is this not a problem?

EdGasket

Yes could be. As I said I use SPGP which buys actual securities (and I have found in practice tends to move at twice the % change in the gold price) so has none of those problems but I do see what you mean.