Of Gold and Gemstones

As the world economy goes through a roller coaster ride with terrorist attacks all over, then Brexit, then negative interest rates in Japan and with the U.S. presidential elections just over the horizon, people want something safe, predictable and tangible.

There has been a flight to safety in the form of actual gold and gemstones. Physical gold, silver and gems stored in vaults and safe deposit boxes of Malca-Amit in Singapore have jumped close to 90 percent in the past year.

There are some who are not sure prices will keep rising, as we see more increases in U.S. borrowing costs which will lift the greenback and tarnish a metal that pays no interest. And the probability of 3 rate hikes from now through end 2017 means there is little room for rallies. All this is according to Luc Luyet, a currencies strategist at Pictet Wealth Management. However, Goldman Sachs Group Inc. likes gold as a strategic hedge – its base price is $1300 per ounce, which is less than the $1340 traded on Tuesday.

People in Asia have always invested in gold, according to Kohelet. And Asia is where more than half the world’s bullion is consumed. “If you take China and India [the two countries with the largest populations] it’s part of the culture and tradition to put some aside,” he said.

 

 

Just a precaution to the trigger happy person who goes and dumps his entire life savings into gold, silver or gemstones: the volatility of such commodities is very high, and knowing when to enter and when to exit is of utmost importance. How many can claim to be able to predict the movement of these commodities and come out big winners? So if even the experts can get it wrong, what more the layman investor?

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