Issue 19

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The Properties of Gold

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Issue 19

  1. 1. Ross Naylor +48 (22) 389 65 70 (w) +48 512 275 706 (m) ul. Królewska 27 lok 411 Warszawa 00-060 Poland The Properties of Gold I was rummaging through some old articles the other day and came across one that I wrote for a Words From the Wisemagazine nearly 6 years ago. Look at market fluctuationsIt was on the subject of investing in gold. Obviously as your friend rather thangold is a lot more expensive now (up around 225% your enemy; profit from follysince the article was written). However, a number of rather than participate in it.the key points remain valid today. - Warren Buffett.With this in mind, I have reproduced the article below.It may seem strange, but in recent years, some of themost astute investors, concerned about volatile stockmarkets and wild currency fluctuations, have used gold,one of the oldest forms of money in the world to diversifytheir portfolios.
  2. 2. When investing in gold, one can either speculate onmovements in the price of the underlying metal or takeadvantage of long-term moves in the shares of goldmining companies.Movements in the underlying price often result from aspecific event. The invasion of Iraq a few years ago is agood example. Did You Know?Shares in gold mining companies on the other handdepend on things like the companys ore reserves, The word credit is derived fromfinancial strength and the likelihood of it being able to the Latin credere or creditum, which means "to believe".extract those reserves. Political risk is also important, asgold is not evenly distributed across the world."Gold is where God put it," says Dr Graham Birch, headof Merrill Lynchs natural resources arm. "It s almostmischievous. It seems to be in some of the mostinhospitable and politically unstable parts of the world."Getting consistent positive returns over the long term isthe goal of most investors and they diversify into a rangeof asset classes to do so. Gold can be a good choice asone of these classes. ApproachingIt does well in times of geo-political uncertainty. People Retirement?are attracted to the fact that it has a physical presence.You can see and touch it. It also works as a hedge If you are approachingagainst inflation, currently on the rise again. retirement, then this video is worth watching.Crucially, the price of gold historically has a negative Ignore the fact that it is America-correlation to the stock market. That means that when centric and a lot of the productsstock markets are weak, the price of gold is strong. referenced are US style financial products.The price of gold also has a strong inverse correlation tothe US Dollar which is attractive in times of Dollar Concentrate on the overallweakness. message, which is the risk that in retirement, you may live forIt is this negative correlation to traditional investments longer than your money does.that makes sophisticated investors consider gold and It is therefore important to have agold shares when building a well diversified portfolio. game plan in place to insure against this "longevity risk".As always
  3. 3. DisclaimerThanks for reading. Your time is valuable and Iappreciate when you spend it reading my thoughts. The views expressed here are my own. They are not necessarilyIf you have any comments or feedback, feel free to drop shared by AES International. Theyme a line. are subject to change at any time based on market and otherRoss. conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities are for illustrative or informational purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Call me: +48 (22) 389 65 70 (w) +48 512 275 706 (m)

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