Political Metals

By Alex Stanczyk | AFE Global Insider

Once an investor comes to the conclusion that gold is currently behaving as money and not as a commodity in this global economic environment, it is then clear how gold might fit into a portfolio. Instead of comparing gold to bonds, commodities, or equities, gold should probably be compared directly against other currencies. In this regard, one could point to the fact that it costs money to store, protect, and insure gold, but I would suggest that the typical 1% per annum cost of doing this is far below the opportunity cost of holding bonds in a negative interest rate environment. If the CCI index is averaging 14% gains per year, what that is really telling us is that the market considers the loss of buying power in the USD to be approaching this number versus the government-reported statistics.

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All portfolios hold a cash component; why not hold some of this in gold? It is as liquid as any other currency with a 24- hour global market. When you compare gold’s performance versus nine of the top currencies globally over the last decade and then average it, you will see that gold has performed on average 17.1% better than all currencies in real purchasing power for the last ten years running.

There may be a time when it is deemed wise to lower exposure to equities and bonds and sit tight in cash. At this point we must ask the question, which form of money is going to hold value the best? Another question that a prudent money manager might consider is, “Do you have a strategic plan in place to deal with currency devaluation and systemic risk?” If not, perhaps it’s time you should.

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Alex Stanczyk is an Executive Vice President of Anglo Far-East Bullion Company and a Market Strategist for the Luxembourg regulated Precious Metals Fund - LFP Prime SICAV SIF

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For those who don’t agree with Alex, you have company! Listen to what this reporter has to say about why some investors are not buying gold.

Apparently, some investors don’t buy gold because it is backed by nothing! At least the USD is backed by the American government, and the Federal Reserve will still be around a year from now .. And that makes it a more comfortable investment for them!