An intriguing misconception about Gold

Dear Ladies and Gentlemen

I am really happy for all your feedbacks and for all the encouraging words I am receiving. When I write about topics stemming from my readers or from myself, I am of course never quite sure if I will create enough interest on your side. This is why I am always happy to receive your very open feedback. Thank you very much!

In the last two weeks, gold had a good run and I have received a few comments by SMS, WhatsApp, e-mail and I even received one or the other call. The comments came mostly from personal friends who happen to be on the “Stefan’s weekly” distribution list.

One topic that came up over and over again was the topic of gold. Now, most of you know that I like gold as an investment, a very long-term investment. However, I really like physical gold in a portfolio only for one reason, to store value long-, if not very long-term. Gold futures or ETFs for short term speculation is not my thing and thus if gold is going up or down 5% or 10% is not important to my whatsoever.

Now, it is in there that I see a major misconception.

Apparently, there are people who believe that we can get rich just by holding physical gold. I personally don’t believe in this. In a purely economic sense there needs to be a productivity factor and by just holding physical gold I don’t see that. Goldmines do offer access to that productivity factor but physical gold doesn’t. But physical gold may be seen as one possibility that maybe can help you storing value during very, very difficult economic and/or monetary market conditions. Nonetheless, gold will basically only go up in price, if market participants see (systemic) risks of any sort (inflation, currency reforms, deep recessions, fear of political conflicts, etc, etc.). There may be exceptions, but I think you get the idea, and therefore this also means, if you hold physical gold and you do want to get rich with it, you are basically banking on a crisis of some sort. (This is exactly why I think gold makes such a great investment because in the past it was the case that gold was great for storing value long term, even very long term and even during multiples catastrophic periods).

To sum it up, I personally see gold as some sort of a hedge or insurance. To me gold is a bit like a car insurance, I have one, but I hope I will never need it.

Just imagine, if an investor hopes for some economic misery to arrive just so that her/his gold would go up, this would be like hoping for a car accident to happen so that the insurance company will finally pay back a part of the premiums the policy holder was paying over the last years. This would be somewhat ridiculous, no?

And now, once again, Ladies and Gentlemen, please keep in mind that I can’t foresee the future and whatever I am sharing with you in my weekly mails reflects my very own personal opinion and please keep on sharing your thoughts and ideas with me. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks indeed, Ladies and Gentlemen and now I wish you a great day and weekend.

Kind regards.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG