Showing posts with label gold. Show all posts
Showing posts with label gold. Show all posts

Thursday 6 May 2010

Buying gold

Yesterday I made another purchase of gold despite me detailing here that it is still well above its historical average real (after inflation) price and real trend line price in US Dollars (GBP). The same also holds true for gold when priced in British Pounds (GBP). I made this decision after the monthly analysis of my retirement investing low charge portfolio detailed that I was still 0.8% short of my desired asset allocation.

Tuesday 27 April 2010

Gold Priced in British Pounds (GBP) – April 2010 Update

In absolute terms gold continues to climb in value reaching a new high today of £745.44 (when compared with the monthly historic dataset) since gold started its upward climb in 2005. In the last month gold is up £5.83 ounce however in real (inflation adjusted) terms as shown in today’s chart gold is actually going nowhere rising by only £0.77 per ounce.

Sunday 25 April 2010

Gold Priced in US Dollars (USD) – April 2010 Update


Within my Retirement Investing Strategy I currently hold 4.1% (up from 3.5% at the last USD gold update) of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide a yield (dividends, interest etc).

Thursday 22 April 2010

Buying Gold

Gold priced in US Dollars (USD) and gold priced in British Pounds (GBP) remains above its historical real (after inflation) trend line price and above its historical real historical average price. It is however still below its historic real highs priced in either of these currencies. I’ll try and get monthly updates up for gold in both currencies in the next few days however today I’d like to report a buy/sell decision that I have made. I try and report every one of these (but I’m sure I’ll forget to do this occasionally) so that you can track what I’m up to.

Wednesday 31 March 2010

Gold Priced in USD – March 2010 Update

Within my Retirement Investing Strategy I currently hold 3.5% (up from 3.2% at the last USD gold update) of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide a yield (dividends, interest etc).

Tuesday 16 March 2010

Gold Priced in GBP – March 2010 Update

In absolute terms gold continues to reach new levels of expensiveness in GBP terms when looking back over historic average monthly data since 1979. However there has been a lot of inflation over this period and so as always I will look at the real (inflation) adjusted price of gold over this period which is my first chart today. The inflation dataset that I will use is the UK retail prices index (RPI).

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%.

Monday 22 February 2010

Gold Priced in GBP – February 2010 Update

I am currently forced to buy gold priced in GBP for my retirement investing strategy as this is where my earnings from employment occurs. I t therefore makes sense to look at how gold has performed over the years priced in local currency.

At the time of writing this post the announcement has just been made that the government’s net borrowings for January are dire at £4.34 billion compared with last year’s surplus of £5.3 billion. This looks to have caused the GBP to weaken to 1.557 to the USD and even with the International Monetary Fund (IMF) declaring that they intend to sell 191.3 tons making gold priced in GBP to be currently £715.57.

In absolute terms gold has never been this expensive when looking back over historic average monthly data since 1979. However there has been a lot of inflation over this period and so as always I will look at the real (inflation) adjusted price of gold over this period which is my chart today. The inflation dataset that I will use is the UK retail prices index (RPI).

This chart shows a very different story. Since 1979 we have seen two higher real peaks. The first was £840.89 in 1983 and the second was £1043.39 back in 1980. These peaks are 18% and 46% higher respectively than today’s price suggesting that there is still plenty of potential upside.

The trend line of the chart suggest gold today at only £248.20 and the historical average real gold price from 1979 is £429.50. So by both these measures gold looks over priced in GBP terms.

History suggests that gold has significant potential upside from its price today and given that I am underweight gold against my desired low charge portfolio I think I am going to buy some more. I will of course update the blog when this occurs.

As always DYOR.

Assumptions include:
- Last Gold price actual taken on the 18 February 2010
- All other prices are month averages.
- February ‘10 inflation is extrapolated.

Thursday 18 February 2010

Gold Within My Retirement Investing Strategy – February 2010 Update


Within my Retirement Investing Strategy I currently hold 3.2% (up from 3.1% at the last gold update due to a buy decision made this month) of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide a yield (dividends, interest etc).

The first chart shows the updated real price of gold since 1968, with the wild ride that comes with gold obvious. This month the real (after inflation) price of gold has risen by about 0.3% to $1,119.40 per ounce. The trend line however suggests a price today of $631.00 which is the same as the last update. The historical average real gold price from 1968 also remains at $600.52. So by both of these measures gold still appears overpriced.

The correlation between the real S&P 500 (also displayed on the first chart) and real gold also holds from the last update at -0.33. The second chart provides the ratio of the S&P 500 to gold demonstrating just how far apart the two can vary. Today this ratio has lowered slightly from 1.01 to 0.96. The trend line however suggests a ratio today of 2.63 and the historical average ratio from 1968 to today is 1.63. So this measure would suggest that if you were looking to choose to buy the S&P 500 or gold then the S&P 500 might be the better option.
The final point to make however is that while both the first and second charts suggest gold is overpriced on historic measures I cannot forget that in 1980 gold reached an average real monthly price of $1,728 which is a long way above where we are today.

My investment methods are largely mechanical and given that I am underweight gold against my desired low charge portfolio I should be buying more. Unfortunately all my earnings are made in GBP and in this currency gold is starting to feel expensive. Of course I would never make a decision based on feel so I’m going to do some historic real gold price analysis priced in GBP before making the decision to buy more. Of course I’ll share this analysis with you over the next few days.

As always DYOR.

Assumptions include:
- Last Gold price actual taken on the 16 February 2010
- Last S&P 500 price actual taken on the 12 February 2010.
- All other prices are month averages.
- Inflation data from the Bureau of Labor Statistics. January and February ‘10 inflation is extrapolated.

Monday 25 January 2010

Gold Within My Retirement Investing Strategy – January 2009 Update


Within my Retirement Investing Strategy I currently hold 3.1% (up from 2.6% at the last gold update due to a buy decision made this month) of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide a yield (dividends, interest etc).

The first chart shows the real price of gold since 1968, with the wild ride that comes with gold obvious. This month the real (after inflation) price of gold has fallen by about 3.2% to $1,096.00 per ounce. The trend line however suggests a price today of $631.00 up from $630.00 at the last update. The historical average real gold price from 1968 to today is $600.52. So by both of these measures gold appears overpriced.

The correlation between the real S&P 500 (also displayed on the first chart) and real gold lowers slightly from the last update which was -0.34 to -0.33. The second chart provides the ratio of the S&P 500 to gold demonstrating just how far apart the two can vary. Today this ratio is 1.00. The trend line however suggests a ratio today of 2.6 and the historical average ratio from 1968 to today is 1.63. So this measure would suggest that if you were looking to choose to buy the S&P 500 or gold then the S&P 500 might be the better option.

The final point to make however is that while both the first and second charts suggest gold is overpriced on historic measures I cannot forget that in 1980 gold reached an average real monthly price of $1,728 which is a long way above where we are today.

I made the decision to buy gold. Largely this is because I have set myself mechanical requirements that bring little to no thought process or emotion into the decision. Only time will tell if the decision was correct.

As always DYOR.

Assumptions include:
- Gold and S&P 500 January prices are that at time of writing 25 January 2010.
- All other prices are month averages.
- Inflation data from the Bureau of Labor Statistics. December ‘09 & January ‘10 inflation is extrapolated.

Sunday 24 January 2010

Buying Gold

I made the decision to buy gold last week. At the close on Friday gold had come off its highs to be at $1091.50. In British pounds gold was off its November peak by about 5%. The buy was not big. I nibbled by transferring about 0.6% of my total retirement investing assets from cash held in British pounds.

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%. As I highlighted on Monday my current low charge portfolio mainly through contributing around 60% of my gross earnings towards my retirement investing strategy had seen my actual gold holdings reduce to 2.6% portfolio. This was too low.

2. Gold in 1980 reached a real monthly average price of $1,728.

3. It looks as though inflation may be among us with the RPI leaping to 2.4%. My personal feeling is that the Bank of England will not raise interest rates to counter this so I am thinking I may need more inflation protection than I already have.

The con’s that I could come up with were:

1. I hadn’t bought gold for some time as my analysis showed that if gold was following the trend line it would have a real price of $630.

2. The average real (after inflation) price for gold since 1968 has been $599. This suggested that gold had a good chance of returning to trend in the long term.

As always DYOR.

Sunday 3 January 2010

Gold Within My Retirement Investing Strategy – January 2009 Update


Within my Retirement Investing Strategy I currently hold 2.6% of my portfolio in gold with a targeted holding of 5%. Gold is the only portion of my portfolio that does not provide some sort of yield (dividends, interest etc). So why do I hold it?

The first chart shows the Real price of gold since 1968 with it becoming quickly obvious that it can be a wild ride. The first reason I hold gold is demonstrated by drawing a trend line through the dataset which provides the formula Real Price = 1.37 x Year -2120. This suggests a trend Real price in 1968 of $573 and a trend real price in 2010 of $630. So provided you don’t buy during one of the scary boom periods this suggests that gold has the potential as a good long term place for me to protect myself from inflation.

The second and very important reason I hold gold is that the correlation between the Real S&P 500 (also displayed on the first chart) and Real gold is negative at -0.34. The second chart provides the ratio of the S&P 500 to gold demonstrating just how far apart the two can vary. So my thought here is that there will be some opportunities where stocks will be overvalued but gold will be cheap (and I can buy) and vice versa. Over the long term maybe I can then squeeze some more performance out of my portfolio.

For the moment I don’t know what to do with gold. I’m certainly not selling what I already own as it’s a long way from its historic Real highs however I’m not sure whether to buy any more as it’s also a long way above its historic trend line...