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Gold May Help Meet Long Term Goals

Release Date: 
Friday, August 2, 2013

Gold and Silver Prices:

Gold prices dipped this week as three major central banks maintained their current monetary policies, while silver had a choppy week of trading.  Gold ended the week down $20.30, closing at $1,314.50. Silver ended the week at $19.99, falling $0.10. 

Gold Is Important Long Term Investment

Financial advisors Steve Cordasco and Jason Mardinly discussed gold’s role in a diversified portfolio in an article for TheStreet. “Gold never was -- and should never be -- looked at as a short-term investment. It serves numerous long-term goals…For instance, in 2008 investors flocked to it for its safety and the fact that it is an investment uncorrelated to stocks and bonds. Gold is still performing both those roles effectively… gold continues to serve as a hedge against inflation as it is a real asset that holds its value more than paper currencies…Therefore, for the investor seeking an uncorrelated, safe hedge against inflation in his or her portfolio, gold should still be considered the number one investment choice despite having hit a spot price peak in 2012…”

The authors also warned of the risk of future inflation. “Take a look at this statement: "With central banks around the world printing money, inflation is imminent." Does that match your world view? If so, you (and I) believe it will only be a matter of time before the cash people hold will purchase fewer goods.  If that rings true for you then, as a prudent investor, you will need to offset this decline in the value of cash by holding a small portion of your portfolio in gold-based investments…” (“Down, but Still Worthy of Your Love,” TheStreet, 7/31/13.)

World Gold Council: Gold Helps Preserve Capital and Reduce Risk

The World Gold Council’s newest research paper, the Gold Investor, explains how gold plays an important role in a diversified portfolio. According to the Council, gold provides risk management and capital preservation.

For risk management, the Council found “[g]old provides portfolio diversification through its lower correlation to other assets.”  The Council also concluded gold “provides tail risk protection by consistently reducing portfolio losses during tail-risk events…” Finally, the Council noted “[g]old is a high quality, liquid asset… Gold lacks credit risk, helping investors to balance the risks present in their fixed income and equity allocations.”

The Council identified two reasons why gold helps with capital preservation. First, “[g]old hedges against extreme inflation scenarios like deflation and hyperinflation.” Second, “[g]old protects against falls in developed market currencies.”  (3 Gold Investor, World Gold Council, July 2013.)

FOMC Meeting Provides Few Clues of Future Quantitative Easing

At the conclusion of its two day meeting, the Federal Open Market Committee (FOMC) released a somewhat dovish statement regarding the economy as it downgraded the economic growth from “moderate” to “modest.” 

After the FOMC meeting, the Bank of England and the European Central Bank left monetary policy and interest rates unchanged.  (“ECB Keeps Interest Rates on Hold Amid Improving Economy”, Bloomberg, 8/1/13)

Job Market Remains Sluggish

The U.S. added fewer jobs in July than projected with many of the new jobs in lower wage sectors. The average hourly earnings also dropped for the first time in nine months. In all, the labor figures point “to a recent pullback in the pace of hiring.”

The tepid economic numbers are likely to weigh against a Fed decision to reduce its quantitative easing in September, according to an economist with BNP Paribas: “Despite the decline in the unemployment rate, we think the combination of weak GDP growth and a slowing in hiring reduce the likelihood the Fed will proceed with the first tapering...in September…” (“U.S. Adds 162,000 Jobs, Continuing a Tepid Run,” WSJ, 8/2/13.).

Two-Way Price Guarantee Program

For a limited time, Goldline has expanded its industry leading Price Guarantee Program to provide its clients with both upside and downside protection. With a qualifying purchase of Goldline's exclusive, limited production gold and silver coins, you can either call to reprice your coins if the selling price falls  or, if the selling price increases during the qualifying period, you can call to acquire additional coins at the original selling price. Conditions and limits apply so call Goldline now to learn more about this special offer.

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Click here to listen.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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