Gold baby thrown out with equity bathwater?

“Gold prices getting crushed, where do investors seek refuge now?” cried headlines from a well-known Canadian bullion online news site this week.

Well, without hiding behind the old ‘everything is relative’ argument, the 2020 year-to-date 2% fall in the dollar price of gold should be measured against a 27% fall in the S&P 500 equity index during the same period.

My suspicion is that investors have been selling everything they can this last couple of months, not an uncommon course of action in times of stress: in October 2008, all assets – gold included – fell sharply as the financial crisis started to unfold, and it was not until the following year that the gold price really rose, some 24% during 2009.

Comfort, however mis-guided, is still gained by holding cash, it would seem. How else can one explain a strengthening dollar despite actions and words from both Federal Reserve and President that would ordinarily deter buyers of the greenback? Not that Great British, sterling-thinking gold holders really mind: the recent GBPUSD currency move means that gold in pound terms is up 12% so far in 2020.

At a time when zero-to-negative interest rates look like they will be the norm, central bank money printing seems to have become less effective, global economic growth forecasts are being cut and deflation might be the newest financial phenomenon to fear, I think gold has an important role to play in your portfolio.