The precious metal, often labeled as ‘inflation protection’ and known as a ‘safe haven’, looks dull. Gold is down 23% from its March high and 10% since the start of the year. ‘What to do in a bear market?’ Experts explain the question and whether there is a price to keep gold in this environment. We have prepared the experts’ golden comments and assumptions for our readers.
Gold comments and advice from experts
Why hasn’t gold performed more smoothly this year?
In order to control the inflation monster, central banks began to tighten their policies. In particular, the Fed responded to historically high inflation with aggressive rate hikes. Koindeks.com As you can follow, gold prices fell with the pressure of high interest rates and strong dollar. City Index market analyst Fawad Razaqzada made the following statement:
First, major central banks around the world tightened their policies. This helped send bond yields to multi-year highs. Return-seeking investors stayed away from zero-yielding assets like gold. Instead, they chose to hold government bonds to get guaranteed returns.
The second reason, according to Razaqzada, is the strengthening US dollar. It put heavy pressure on almost all major monetary assets, including gold. That’s why buyers who earn in foreign currency have to pay more, the analyst says. For this reason, he notes that the hegemony of investing in gold has been broken.
Should investors keep gold in their portfolios, and if so how much?
This is where fund managers and strategists really differ. Here are the gold comments from InfraCap Equity Income Fund (ICAP) ETF portfolio manager Jay Hatfield:
We do not recommend a fixed allocation to gold unless investors want to speculate on exchange rates or have other short-term bullish momentum that could cause gold to gain value.
In general, Rob Haworth, senior investment strategist at US bank wealth management, offers the following advice:
Given the price volatility and balanced income stream, portfolios should have little or no permanent exposure to gold or metals. If investors are particularly alarmed by the reversal in the price of the US dollar, which could further reduce inflation pressures and support gold prices, they may consider very modest risks.
The gold comments of Imaru Casanova, VanEck deputy portfolio manager/senior gold analyst, are as follows:
In general, each investor’s situation is unique. However, we value that an allocation of 3-5% to gold artifacts is sufficient. We also recommend this to capture the benefits of holding gold as an asset class.
Mohit Bajaj of WallachBech Capital explains on the portfolio allocation:
I’ve always been a big advocate for diversifying risk across all asset classes. For gold, a random place of 5-10% is more than enough.
Physical gold or paper gold?
Which is better for investors looking to hold the yellow metal? Physical gold or paper gold (investments involving gold ETFs)? Louis Navellier, founder and chief investment officer of Navellier & Associates, does not recommend physical gold. But he says he has a clue for those who insist on keeping it. He explains it in this form:
The coins have a great valuation. For this reason, Credit Suisse bars are often sold at a lower valuation.
As for ETFs, Navellier says, “I don’t recommend gold ETFs as I don’t like paying ETF spreads.” But Bajaj of WallachBech recommends SPDR Gold Shares (GLD) “if you want to access gold without having to physically buy the metal.” GraniteShares Gold Trust (BAR) is “another company that we see very strong demand for,” Bajaj says.