The precious metal is often labeled as an ‘inflation hedge’ and commonly known as a ‘safe haven’, it looks boring.
Prayed (GC=F) is 23% below its peak in March and 10% below year to date.
In our series, ‘What to Do in a Bear Market,’ we ask the experts if there is value in holding gold in this environment.
Why hasn’t gold performed better this year?
“First, with major central banks around the world tightening their policies, this has helped send bond yields to multi-year highs. Yield-seeking investors have been better off holding government bonds for a guaranteed return rather than zero-yield assets like gold,” Fawad Razaqzada, Market Analyst at City Index and FOREX.COM he told Yahoo Finance.
“Second, the strengthening of the US dollar has greatly affected almost all major dollar-denominated assets, including gold. Prospective buyers who earn in foreign currency have to pay more, so they are discouraged from investing in gold,” he continued.
Should investors hold gold in their portfolios, and if so, how much?
This is where fund managers and strategists really differ.
“We don’t recommend a fixed allocation for gold unless investors want to speculate on currency rates or have some other short-term bullish thesis that could see gold appreciate,” Jay Hatfield, portfolio manager at InfraCap Equity Income Fund (ICAP) ETF told Yahoo Finance.
Rob Haworth, senior investment strategist at US Banking Wealth Management, generally recommends “little or no permanent exposure to gold or metals for portfolios given price volatility and lack of a consistent income stream.” “.
“Investors may consider very modest exposures if they are particularly concerned about a reversal in the value of the US dollar, which could further upset inflationary pressures and support gold prices,” Haworth said.
Others admit a small exposure in a portfolio.
“Overall, while each investor’s situation is unique, we believe that a 3-5% allocation to gold products would appear to be the right size to capture the benefits of holding gold as an asset class,” says Imaru Casanova, Associate Portfolio Manager/Senior Gold Analyst. in VanEck
Mohit Bajaj of WallachBech Capital tells Yahoo Finance that he is a “big proponent of always-generalized allocation across all kinds of asset classes. Anywhere between 5-10%…should be more than enough.”
For investors who want to hold the yellow metal, which is better: Physical gold or paper gold (investments that hedge gold ETFs) ?
Some experts raise security and storage concerns when it comes to physical gold.
Louis Navellier, founder and chief investment officer of Navellier & Associates, tells Yahoo Finance that he doesn’t recommend physical gold, but he has advice for those who insist on holding it: “There’s a huge profit margin on coins, so Credit Suisse bars are generally sold at a lower markup.”
As for ETFs, Navellier says, “I don’t recommend gold ETFs, as I don’t like paying ETF spreads.”
But WallachBech’s Bajaj recommends SPDR Gold Shares (GLD), “if you want to get access to gold without having to physically buy the metal.”
GraniteShares Gold TrustBAR) “is another where we have seen strong demand,” Bajaj said.
“From a price point of view, it’s only like $16 or $17, so for those who are novice investors who want to get a foot in the space, they can buy that without having to spend that much capital,” he added.
Inés is a market reporter for Yahoo Finance. Follow her on Twitter @ines_ferre
