Saturday 27 February 2010

Buying Gold

As I postulated here I made the decision on Wednesday to buy more gold. As with the last time I bought gold, the buy was not big at 0.6% of my total retirement investing assets. The trade was made by moving cash to gold rather than with new money. At the close on Friday gold had reached £733.01 (Note: I have a gold priced in GBP widget on the right hand side bar widget of this blog as I follow it closely) which means that even allowing for buy/sell spreads and trading costs I am up on this buy decision by 2.5%.

So when weighing up the buy what were the pro’s that I could come up with:
1. My desired low charge portfolio has an asset allocation dedicated to commodities and more specifically to gold of 5%. At my last update my gold holdings were only 3.2% of my portfolio. This was too low. Following the trade I am now at 3.9% today.
2. Gold in 1983 reached a real monthly average price of £840.89 and in 1980 reached a real monthly average price of £1,043 so we are not near previous highs.
3. The Bank of England seem to have decided that inflation is a good thing with the retail prices index (RPI) moving this month to 3.7% with no action. As I described here this means that it is impossible for me to get a real return on my cash.

The con’s that I could come up with were:
1. If gold was on its GBP trend line it would have a real price of £248.
2. The average real (after inflation) price for gold from my data set since 1979 has been £429. This suggests that gold is currently well over what could be described as fair value.

As always DYOR.


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  2. Did you buy bullion bars or gold coins such as sovereigns or Britannias to avoid CGT or put your gold into SIPPS so the government pay you an extra 20 or 40% dependant on your tax bracket

  3. John
    I bought an ETF which is backed by physical allocated metal. This is the only way I know to pack it into an ISA.