Gold has a place in high-net worth individuals portfolios as an insurance policy against systemic risk in the banking system, says Carmignac commodity investor Michael Hulme.
EW: Hello, and welcome to Morningstar series, “Why Should I Invest With You?” I’m Emma Wall and I’m joined today by Carmignac’s Michael Hulme. Hi, Michael.
MH: Hi Emma
EW: So, we’re here today to talk about commodities. That’s your bag. I thought we’d start with that headline grabbing commodity, gold. Gold has hit the headlines this week because $2.3 billion worth of gold ETFs have been sold as gold hit a five-year low. How much further can gold can go and should we care?
MH: Very interesting question. Yes, gold has certainly lost some of its luster recently and I guess, many people are asking the question, is it foolish to invest in gold?
I think gold still has a place in portfolios. I think gold, in particular, has a place in high net worth individuals portfolios and I think there were several reasons for that.
Gold is really an insurance policy against systemic risk in the financial system now.
While it’s been nearly seven years since the last melt down, given the jitters we’ve seen in China recently and the ongoing concerns about leverage and credit worthiness globally, I still think gold has a role to play as a modicum of insurance policy.
I think that’s compounded by the fact that although we’ve seen a lot of sales of gold, actually if you look at China recently, over the last several years they’ve actually been increasing their stocks of gold and adding to them over time. And I think the prudent investor — while you can make a case for saying gold is actually any worth as much as anyone thinks it should be worth, but the prudent investor might take heed of the fact that what the Chinese are doing.
Yes, they are devaluing and to a certain extent that’s exporting deflation. But actually overall across the world what we’re seeing is a series of competitive devaluations, and ultimately they are inflationary in terms of (fear of) currency.
So what we will see over time, I think is a reasonable chance that we’ll see an inflationary risk rising across the spectrum.
There are also risks obviously of a more systematic nature. In that context, I think certainly from a technical perspective, gold looks quite intriguing here.
Founded in 1989 by Edouard Carmignac and Eric Helderlé, Carmignac is now one of Europe’s leading asset managers.
Today’s Gold Prices: USD 1134.40, EUR 724.63 and GBP 990.05 per ounce
Yesterday’s Gold Prices: USD 1,154.25, EUR 999.35 and GBP 730.56 per ounce.
August Month to Date Performance
Yesterday, selling in the futures market saw gold fall $13.60 to $1139.50 in New York – down 1.1%. Silver slipped 0.95% or 14 cents to $14.64 per ounce.
As ever, it is vitally important to focus on asset performance and investments over the long term – months, quarters and of course years. So far in August, gold has outperformed the vast majority of major assets (see table above) and is 3.57% higher for the month while leading stock indices have fallen by more than 10%.
Gold’s hedging and safe haven characteristics are being shown again and we believe this important safe haven importance of gold in a diversified portfolio will again become evident in the coming months.
Gold prices consolidate but currency weakness may provide support – The Bullion Desk
Precious-Metals Trading Is Probed by EU After U.S. Inquiry – Bloomberg
Dow, S&P close lower in biggest reversal since Oct. 08 – CNBC
Mood Getting Worse on Wall Street as S&P 500 Floor Eludes Bulls – Bloomberg
World shares sag as China jitters persist – Reuters
Gold a ‘Buy’ says Barrat – Bloomberg Video
Gold Facts and Gold Speculations – GoldSeek
Donald Trump, Fascist – Daily Reckoning
The cronies are on the run – MoneyWeek
Chinese alarm over? No, this is merely a pause in an ongoing debt crisis – The Telegraph
Click on News and Commentary
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