For a true gold bug, it’s not enough to simply own a gold ETF. You need to own real slabs of the yellow heaven to be part of the inner circle.
Given that physical holdings of gold in exchange-traded securities jumped 33% year to date, this cycle is expanding at an alarming rate.
Feeling the competition from physical gold, ETF managers are also out marketing like never before.
Reuters: John Reade, head of markets strategy at UBS Investment Bank, also confirmed that UBS clients were showing an interest in assets that would provide inflation protection. “You don’t need high inflation for gold to perform well – you only need an increase in the number of people who expect inflation to rise.“ [Ed note: Ahem, ponzi scheme greater-fool’s-game?]
Over the last 30 years the returns from gold have been reasonable but not great, with high volatility, he said. But in an environment where the US dollar is weakening, the Fed Funds rate is rising and inflation is rising, gold can be expected to perform, with returns of over 40 per cent per annum if CPI increases. This suggests that an investor’s tactical allocation to gold should rise in the coming months, Reade said.
Expect 40% annual returns!?! Ok, it’s official. Gold is no longer a defensive investment.
Gold is to us today what real estate was not too long ago. It’s the “near-sure” route to speculative gains for a rapidly growing portion of society. Yet if the metal can rally based on simply more people expecting inflation to rise, then at the same time it can crash due to simply less believing so.
This could go on for a while, but sorry goldbugs, you’ve lost the “conservative” moral high ground.