GOLD - A wild ride!
Aug 20, 2017
If you would prefer to listen to me read this blog post, please click on the play button.
I thought it was time to quickly revisit my beautiful gold. I blogged about it when I bought it for the first time and you can find it here: www.thehappysaver.com/blog/letsbuygold
Over an eight month period, starting in May 2016, in total I purchased six ounces of gold. I bought an ounce here and two ounces there which I have marked on the graph below.
Gold price showing last two years.
History and hindsight now shows me that I bought before, during and after a pretty decent sized peak in the gold price. That’s Murphy’s Law for you! Of course I had no way of knowing that at the time! I made my last purchase when the price had dropped down in an attempt to average out the price I paid. All in all the average price I paid was $1902oz. That is pretty high.
I rang Mike from Morris and Watson (this is the company I buy my gold from) and asked what he would give me if I sold him an ounce of gold today. The answer $1689oz.
That is a $213 drop per ounce. Ouch! I have put it in bold just so the significance of that number sinks in.
Buying gold has been a huge lesson in what my appetite for risk is. Am I flailing around on the floor groaning “WHAT HAVE I DONE??? I’m hemorrhaging money”!!!
Nope.
I did say “bugger”, but it was in lower case, and said quietly to myself.
Am I going to cut my losses, sell it all and buy into something with a better return (or even just a return might be good).
Nope.
The thing I have learnt about gold in the last year and a half, that I would not have learned if I had not dipped my toes in the water and actually bought some is that gold is EXTREMELY volatile. You don’t get a full appreciation of this when they casually mention today’s gold price in the business news. Investing in gold is like share trading on 10X speed; everything moves so FAST. How would I feel if this were how house prices changed day by day? Could I stay the course?
I am now a seasoned observer of gold and this is my EXTREMELY DETAILED analysis of how the fluctuating gold price works:
The world is feeling GREAT - everyone SELLS their gold
The world gets a FRIGHT - everyone BUYS gold
It’s a complete roller coaster ride made all the more dramatic every time that idiot of a US President opens his gob or sends a tweet.
Here is what the gold price has looked like over the last year:
Gold price over the last year.
Here is an image of a roller coaster ride:
Roller coaster ride.
You will note certain similarities yes? How’s this for a wild ride?
Gold is considered a safe haven in times of turmoil and it keeps getting a mention each time that idiot of a US president has a rant, which is far too often. I think the article below sums up that a lot can happen to gold over the course of a week.
LONDON, Aug 15 (Peter Hobson, Reuters)
Gold fell sharply for a second day on TUESDAY after better-than-expected U.S. economic data and a decrease in tensions over North Korea encouraged investors to buy riskier assets, boosting stocks, the U.S. dollar and bond yields.
Gold, seen as a safe haven in times of uncertainty, rose to a two-month high of $1,291.86 on FRIDAY after a week of escalating military threats between Washington and Pyongyang. But fears of conflict eased when North Korean leader Kim Jong Un on Tuesday signalled he would delay a decision on firing missiles towards Guam, a U.S. territory in the Pacific.
July 8 (The Economic Times)
Last week, gold fell below its 200-day moving average after 1.8 million ounces were transacted in a minute at 4 a.m. in New York. A day later, gold spiked after a similar trade involving more than 800,000 ounces.
Can you imagine being the person who pushed the button on that trade? Makes my six ounces look even more insignificant that is for sure!
The roller coaster ride is set to continue for sometime yet/forever with so many different elements having an impact on it:
Threat of war, geopolitical risk, threat of interest rate rise or fall, the sun coming up in the morning, economic data looking good or looking bad, increase or decrease in bond yields, retail sales up and down, strong or weaker US dollar, the sun setting in the evening, interest rates up and or down…
Nobody really knows what is happening so that is why they buy gold, it is a hedge against other investments. Investors move away from riskier assets, such as buying into a lifestyle property in any country bordering North Korea (joking) and into safer ones, like gold.
Back to me and what my plans are. I bought gold for a long term investment, it has only been a year and a half that I have owned it and I knew at the time that it would not provide me any dividends and the ONLY way to make money was for the price to increase way above where I bought it. I got even once or twice but now it has dropped well back. I could sell it today at the price Mike quoted me above and get that money in my bank in just a day or two, so it is an asset that I can easily turn into money if I had to. But, I don’t have to so I’ll just continue to go about my day, keep an ear open for the gold price from time to time and just generally enjoy the roller coaster ride. If the price went way, way, way down I might buy another ounce to nudge my average price paid down but other than that I think I have more than enough tied up in this little experiment and I’ll just sit back and enjoy the ride. Yeehaa!
