Page 18 - DIY Investor Magazine - May 2019

3 REASONS TO CONSIDER AN ACTIVELY MANAGED
ALLOCATION TO
GOLD AND SILVER NOW
1
INFLATION
If inlation rises meaningfully (which some believe it could), holding some gold may help protect
your portfolio.
WHEN PURCHASING POWER FALLS, THE GOLD PRICE RISES
The gold price typically moves inversely to real interest rates: in this way, it can help to defend a portfolio against the effects
of inlation.
In the present era of political uncertainty, gold is “apolitical” money.
SOME COUNTRIES ARE LOOKING FOR AN ALTERNATIVE TO THE US DOLLAR TO SETTLE INTERNATIONAL TRADE
The US dollar is highly politicised, and its privileged role in the global fnancial system is increasingly being questioned. Gold is the only non-political currency, in that it isn’t issued by a central bank. Some countries, including China, are looking to fill the role historically played by the dollar, for example to buy oil.
If this trend continues, the importance of the role of gold could grow significantly, so having some in your portfolio may be a prudent decision.
2
POLITICAL UNCERTAINTY
INFLATION IS OFTEN HIDDEN — MAKING TIMING AN ALLOCATION TO GOLD DIFFICULT
“Shrinkflation,” whereby products become smaller, but manufacturers maintain the same price, has become a well- known phenomenon. It’s harder to track than simple price rises, but is a good example of how inflation can appear from “out of the blue.”
INFLATION RARELY ANNOUNCES ITS ARRIVAL — SO CONSIDER ALLOCATING TO GOLD BEFORE IT BECOMES OBVIOUS
Infation is often described as behaving like tomato ketchup in a bottle – you slap the bottle for what feels like ages, and nothing comes out...before suddenly you have a whole plateful, and a problem
on your hands!
PREPARE YOUR PORTFOLIO FOR THE POSSIBILITY OF RENEWED “NON-NORMALISATION” BY CENTRAL BANKS
Central banks have been talking about the possibility of interest rate rises and removing the monetary stimulus they injected into the fnancial system after the financial crisis, but
so far hikes and stimulus removal have been modest. Amid market uncertainty, this could even go into reverse.
We believe gold could be a beneficiary of such an environment.
CENTRAL BANKS ALLOCATE MEANINGFULLY TO GOLD: SHOULDN’T YOU THINK ABOUT TAKING A LEAF OUT OF THEIR BOOK?
Some of the world’s
most important 59% central banks hold a signifcant proportion
of their total reserves
in gold.
69%
73%
65%
2019?
2018