Gold News

Why Hold Gold?

Cos your portfolio might need it, that's why...

EVERYONE is getting bored waiting for the gold price to take off, writes Dave Forest, editor of Doug Casey's International Speculator, in Bill Bonner's Diary of a Rogue Economist.

But there's good reason to believe we'll see it pick up again soon. That's because owning a hard asset such as gold is a time-tested way to protect wealth during troubled economic times.

Right now, we're nearly 10 years into the current bull market on Wall Street. As this bull market gives way to the next bear market, gold is going to be a great asset to have in your portfolio.

Here's why...

Hard assets don't carry any counterparty risk. Unlike a stock or a bond, you don't depend on someone else's promise to pay. So you don't have to worry about the issuer going broke, as so often happens in a financial collapse.

It's a subject my team and I did a deep dive on in the most recent issue of International Speculator. We looked at how different metals performed in the last four financial crashes – the Japanese meltdown (1990-1992), the Asian financial crisis (1997-1998), the dot-com bubble (2000-2002), and the Great Financial Crisis (2007-2009).

We then took the metals that have comprehensive historical data available: gold, silver, platinum, palladium, copper, zinc, vanadium, tin, nickel, and aluminum.

And we plotted their performance during the three "acts" of each crisis...First, one year prior to the crisis. Second, the period during the crisis. And finally, one year after the crisis.

Our analysis revealed which metals were the best stores of value during a financial panic.

Let's just focus on the first five metals here – gold, silver, platinum, palladium, and copper. Those are the ones you will likely be most familiar with.

Here's how they performed over the three acts of previous crises...

As you can see, gold is the way to go during uncertain times.

During the last four major financial crises, gold was the only one of the five metals that increased in value during a crash (gray bars on the chart). It gained an average 3%.

That may not sound like a lot. But remember, in a financial crisis, most of your stock portfolio is going to be taking on water.

Gold also delivered gains before (dark blue bars) and after (green bars) the crashes – rising an average 4% in the year prior to a crash, and 10% in the year after.

So you can see why gold is the safest place to be in uncertain times.

It holds up consistently well during financial panics. Which is why it belongs in everyone's portfolio.

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals