“If you’re looking for an insurance policy against volatility and economic uncertainty, gold is a great way to go…the whole point of diversification is to be prepared in case something goes wrong and your thesis doesn’t pan out.” -Jim Cramer, CNBC
“Say, answer me this, will ya? Why’s gold worth some twenty bucks an ounce? ” -Howard (Walter Huston), “The Treasure of the Sierra Madre” (1948)
In a world of zero inflation, negative interest rates, and trade friction, gold so far has had a banner 2019. Our proxy is Engelhard industrial bullion. Between January 1 and August 31, one troy ounce has gone from $1,283.83 to $1,528.00, an advance of over 19%. As surely as night follows day, many early-year naysayers have jumped on board, and talk of $2,000 and above has started to percolate. Maybe; but, we try never to get too carried away, and instead, like to focus on why an asset class does or does not belong in our clients’ portfolios. In this case, the asset class does belong, specifically as an honored component of our Total Portfolio Management (TPM) and Indexed Total Portfolio Management (ITPM) strategies. Why gold?
Humankind has had a fascination with and a reverence for the barbarous relic since about the time our ancestors discovered fire. Since then, gold has been used to adorn ears, necks, wrists, clothing, etc.; gold has been used to cap teeth; gold has been used in numerous industrial processes; gold has been used to treat disease; and, gold in an investment sense has been used as an alternative to fiat currencies and as a store of value. For these purposes, let’s focus on gold in the monetary/investment world of the modern era, and start with something called Executive Order 6102.
Continue reading “The Barbarous Relic”