Gold rush

You have more than likely heard about gold lately, whether in the news, online or via friends. It has now crossed into all-time highs past $1,900 and several analysts have it reaching $2,000 in the not too distant future, possibly by year end.

Throughout history, gold has been seen as a special and valuable commodity. The vast drivers for gold use all stem from human beings either wanting gold for adornment, global store of value, or for industrial uses (technological, medicinal, and scientific applications). In other words, the demand for gold has always and will always be there.

At present there are two main reasons for the rise in gold price, wanting a hedge against inflation and a hedge against a fall in risky assets. Investors are anticipating a rise in inflation following the unprecedented liquidity injected in the system by central banks and a risk off period following the meteoric rise of equities since the March lows.

If you don’t already have gold, the recommended allocation for a balanced portfolio is less than five percent. Is it too late? As with all investments, timing is difficult but if markets turn sour your gold holding should increase. If the opposite occurs your risky exposure will more than offset the small position in gold.