Regular readers of my morning market post might think I’m a bit too harsh on gold, the shiny but nearly useless metal – except for the aerospace industry – that seems to divide the investment community right down the middle.
For years, I have advocated that holding gold, preferably in a non-derivative form, as a hedge or security asset is a worthwhile insurance against currency crisis. It wont pay off 95-97% of the time you hold it, but when it does, it works 100% of the time against chaos
This has never meant to own ONLY gold, but 5-15% of non investment wealth depending on your circumstances as part of a brace of insurances. And unless you’re a trader, don’t treat it like a speculative asset.
The good news is the “Minsky Hedge” is doing damn well for Australian currency holders as the Pacific Peso dips in the 60s against the USD and is losing 100 pips a day against the Yen as the Yuan currency crisis rolls on.
Here’s the long run monthly chart of gold in AUD, with the USD spot price in green – note the divergence in performance as the latter has been stuck in a bear market for more than 3 years:
Gold in AUD is in a bullish rectangle pattern with support at $1300AUD per ounce and resistance at $1700AUD per ounce. Not a bad hedge over the last four to five years – no real appreciation, unless you time your purchases at the support level.
Compare the same timeframe to the local stock market:
But more importantly, the local currency:
All we need now is another article from the Pascometer that “gold is stupid, buy bank stocks” and off to the races it goes once more…