Gold Prices & Gold Investment

Your Money Questions on Gold Investment:

Do you think the price of Gold will continue to rise? If so, should I invest in buying gold or perhaps in gold mining stocks and shares?

Gold investment Answer from Money Expert Jason Witcombe:

Our view on investing is that for each aspect of a portfolio, there must be some reliable method for it to generate an expected return. Equities, fixed interest and commercial property do that as they have a yield . Gold, like other commodities, has no such mechanism. Instead, its price fluctuates in line with supply and demand. As with other assets that produce no income stream which can be valued and thus projected into the future, prices tend to be volatile.

As a Financial & Investment Planner it would be difficult to explain to a client that we recommend they put money into something that has no expected future return (speculating) at the expense of something that does (investing).

There is nothing wrong with holding gold, just as there is nothing wrong with buying any other asset that has no expected return, such as stamps, art or fine wine. It diversifies your asset base and thus reduces risk. It is, however, hard to justify buying gold on the expectation of future returns because there is no such expectation.
Therefore, going back to your question, if someone wants to hold gold and is comfortable with the volatility, then as you suggest, they should buy into a company that is linked to gold, such as a mining share. Holding an individual share is a risky business through.

Jason Witcombe APFS, CFPCM is a Chartered Financial Planner at Evolve Financial Planning - www.evolvefp.com. Got a money question? In need of some money saving advice from an expert? Put your question to Jason by emailing us here and find out more at: Ask a Money Expert

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