The gold(en) bear
Adam Scott’s superb victory in the US Masters on Sunday at Augusta National means that Australians have now won a total of 15 major golf championships. It’s incredible to think that one of the greatest golfers of all time, Jack Nicklaus, the ‘Golden Bear’, won 18 career major championships by himself.
Whilst we’re on the subject of Gold(en) Bears, at the moment we’re cautiously noting that after jumping from under US$300/oz to over $1,900/oz in the decade to September 2011, gold appears troubled.
In the past 20 months, the price of gold has declined by 30%, from a record high of $1,915/oz to the current $1,330/oz.
Despite most central banks’ printing machines working overtime in recent years, the lack of valuation metrics makes it virtually impossible to value gold.
Factors that may influence the price of gold include sentiment, inflationary expectations, a view on the US Dollar, global production, cost of production, money supply, and central banks’ holdings and intentions. Another consideration for Australian investors is the Australian Dollar/US Dollar exchange rate.
So is the bull market in gold now over, and has a structural bear market commenced?
Neither The Montgomery [Private] Fund nor The Montgomery Fund hold any gold stocks.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
francesco paolo muratore
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tha golden days are over, we been there before if it will break the $1300 i t wiil go towards the $1150 the first support not to far away…i will by at $1000..stop lost $950..we are in for a the axs..is going towards 4500..the next 2 months..than i will start by.
jimmy
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cash in king & gold is second best in troubled times.As country keep printing money the value of gold can only go in one direction i believe. You cant print gold.
Andrew Legget
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If something generates no cashflows and there for very difficult or impossible to truly value its intrinsic worth, can it ever truly be a bargain? There is something for people to meditate over.
Gold has always troubled me, i see it as more of a religion or political dogma (a belief) rather than an investment. It seems to trigger some type of emotional response in many people which makes me wary of it as an investment as i believe that emotion and belief are the source of a bubbles strength that pushes the perception far away from the reality. Reality has a way of sending people back to earth.
Depending on your belief of future inflation etc, it will either be a good price as you expect inflation to increase or a reaction to the markets perception that inflation will not be as bad as predicted. This is where i find trouble as there is no intrinsic worth to measure it by.
I expect inflation to continue to erode value from notes and coins, probably in the short term to be at higher rates than at present, however i aim to invest my excess cash to earn a positive real rate of return. This is my hedge against inflation.
James
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Thanks Roger,
i agree trend-lines are very dubious.
I would like to add in 2008 silver pulled back from $20 to under $11. I was a buyer at $11 when most people said gold/silver has had it’s run. (Gold also pulled back considerably at the same time.)
I also know from experience when it drops it drops fast…but it can also rise just as significantly in a matter of hours. Hold onto your pants!
Keep the big picture in mind and do not act like a day trader with physical bullion.
Dario Petkovic
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Is there an alternative to buying gold stocks if you want to invest in gold i.e. how does one ‘buy gold’ in Australia without buying gold stocks?
Roger Montgomery
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You can buy bullion directly from dealers. Just google Bullion dealer and your capital city. Be sure to go to a reputable one and seek and take personal professional advice.
Dario Petkovic
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Great, thanks Roger. Google I can, ‘reputable’ will take some research unless you can throw a few names. Thanks again!
James
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Personally no I don’t believe the gold bull run is over. The fundamentals have not changed for gold or silver for that matter.
Here is a good vid to watch – http://youtu.be/H8NNUIH__YA
I am a buyer at these prices.
Roger Montgomery
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Thanks James, I am happy to publish the link to the video but everyone should know, now with the benefit of hindsight, that the speaker was 100% wrong. He suggested buying gold when the price was close to $1600 and it is now $300 below that. Another example of trendlines being meaningless perhaps?