A good portfolio approach is to have 5% to 10% of one’s portfolio always in gold. That is the advice we give to anybody who asks us. However the gold prices have gone up a lot in last few months and some of our friends have asked us if they should buy gold now or should they wait for prices to decline. This post is written for them and for all of you who wonder when is a good time to buy gold.
This article is inspired by the works of Nassim Nicholas Taleb whose work concerns problems of randomness, probability, and uncertainty. His 2007 book The Black Swan has been described by The Sunday Times as one of the twelve most influential books since World War II (Souce: Wikipedia).
One of our friends tweeted a table which showed the gold prices in India for the last 95 years. The table is reproduced below:
As an admirer and follower of Mr Taleb, we tried to find if there was a corelation between gold prices and Black Swan events in India. …
Gold has done much better than BSE Sensex and Nifty 50 over the last one year. The graph below shows that gold prices have increased by approximately 27.90% over the last one year
Over the last one year, BSE Sensex has declined by approximately 3.65% as shown in the graph below
The headline of an article by CNBC dated 5th August 2019 is “Gold soars as trade worries trigger flight to safety”. In the article CNBC says that amidst escalating US-China trade conflicts and fears of a slowing economy, investors are buying more and more gold leading to a surge in gold prices.
In the CNBC article Michael Matousek, head trader at U.S Global Investors says “What is driving gold is fear of these tariffs and the fear of China retaliating.” …
The Indian rupee is not one of the strongest currency in the world. In 2018 rupee was one of the five worst performing currencies in the world against USD as shown in the table below (Source: CRISIL Research, Dec 28,2018)
Rupee has deprecated by approximately 45% over the last twenty years (1998 to 2018), as shown in the table below ((Source: Data collated via sources available in the public domain).
In an interview on July 4th 2019 to Bloomberg, veteran investor Mark Mobius said “I love gold”. He further recommended that gold should always form part of an investors portfolio. Every protfolio should have 10% of its investement in gold. In the interview to Bloomberg he posed the following question “As these interest rates come down, where do you go?”
Mark Mobius in the same interview with Bloomberg further added “Interest rates are going so low, particularly now in Europe.” “What’s the sense of holding euro when you get a negative rate? You might as well put it into gold, because gold is a much better currency.”
Please do watch the interview of Mark Mobius with Bloomberg and read the full article.
Gold has done much better than BSE Sensex and Nifty 50 over the last one year. The graph below shows that gold prices have increased by approximately 16.77% over the last one year
Over the last one year, BSE Sensex increased by approximately 6.31% as shown in the graph below
a. 100% Safe and Secure: The first gold coins were minted around 550 BC under King Croesus of Lydia — a province in modern-day Turkey. It quickly became accepted payment for merchants and mercenary soldiers around the Mediterranean. Up until 1492, the year Columbus sailed to America, Thomson Reuters GFMS estimates that 12,780 tones of gold had been extracted. The World Gold Council estimates that all the gold ever mined totaled 187,200 metric tons in 2017. At a price of US$1,250 per troy ounce, reached on 16 August 2017, the total value of all gold ever mined would exceed US$7.5…
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