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  • Writer's pictureIshfaaq Peerally

GOLD Hits All Time High! Time to Buy Gold?

Gold $GOLD $GLD is back to all time high which it reached in September 2011. Is it time to buy?

Gold doesn't have any intrinsic value and doesn't produce any cash flow. It is just a piece of rock which has very limited industrial uses but for over 5000 years, it has been used as a currency. This is why gold is still valuable today. Over the long-term, gold holds its value and it is other securities that changes in value. You could buy more or less the same amount of bread in Ancient Rome than you can today with the same amount of gold.

Since 1971, when the gold standard was abolished, the US Dollar $USDOLLAR has been losing its value relative to gold but that's not limited to the US Dollar since other fiat currencies too are losing their value but since the US Dollar is still the reserve currency of the world and there's always demand for it, the devaluation is not that fast. In recent years, the Federal Reserve system has been printing a lot of money. Will this cause further devaluation and gold prices to keep rising?

Over the last 20 years, gold outperformed the S&P 500 $SPX500 . If you had invested $10000 in gold in 2000, you would have $64 000 today but only $21 000 in stocks. Most of these gains happened between 2000 and 2011. The last decade was bad for gold but good for stocks, mostly because of government actions. According to Ray Dalio, a paradigm shift is coming and this decade might be better for gold than stocks.

If there's going to be higher inflation, central banks and investors are going to buy gold and this will increase the demand and consequently price.

The easiest way to invest in gold is through the GLD ETF but the best way, according to me, is through a GREAT gold miner $GDX . I've invested invested in Polymetal International $POLY.L a Russian gold miner since last year. Investing in gold miners can be risky that's why you need to be very careful. Do your homework well.

What about Silver $SILVER ? The Gold to Silver ratio is quite high right now and if gold prices go up, Silver is likely to go up more. Silver also has industrial uses and is used in solar panels. It is much more interesting to look at silver rather than gold in my opinion. I have exposure to silver too through Polymetal international, which is the third largest silver miner in the world.

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