DAWN OF A GOLDEN ERA

OR: one more chapter in the Gold saga 

For years, every fund manager and so called money expert has been saying, don't buy gold. It is an unproductive asset, it is not used for any useful purpose like producing goods, it is just a lump of useless metal, you should invest in something that grows, and a host of other similar specious reasonings, all pointing to why gold is not good as an investment. In this context, whenever we say  gold, we mean silver also, so I presume they broadly meant silver too, though silver has many more industrial uses than gold does. 

They were negating centuries of human experience. Gold has always been considered a good asset for wealth preservation, across cultures, in every era of recorded human history. 

That is the problem with "experts" of all kinds. This includes, along with money managers, doctors, nutritionists and  gym trainers also - a lot of what they recommend  goes against common sense and centuries of accumulated human wisdom. 

Whenever you see the phrase "experts opine", beware. Their arguments are beguilingly convincing, all the more because they end up convincing each other in their own echo chambers, that since they all think so, it has to be true! 

Now the experts are being forced to eat their own words. Jamie Dimon, CEO of J.P.Morgan, is now saying that gold could even double from current levels. Dhirendra Kumar, a well known figure in Mumbai financial circles,  who heads Value Research, says, yaaa, you know, things have changed, now it's different, gold is good, etc etc but he is still reluctant to say "load up on it", it is never easy when you have to backtrack. 

All this is in the backdrop of the recent spurt in gold prices. If you have not been living under a rock, you know what I am talking about. 

I have always been a fan of gold. In my personal finance classes which I have been conducting over the last thirty years, I have always recommended a healthy allocation to gold, upto 15 percent of the portfolio.   I never spoke about silver since it seemed to rise broadly in line with gold, while being more volatile. Plus, silver ETFs were not available then in the Indian market, while gold ETFs were. 

Things have changed now. 

I am increasing my recommendation to "at least one third of portfolio in gold and silver". Within that allocation, I would say gold two thirds, and silver one third. Personally, I am going even higher. 

Silver has also exploded in price over the last one year. 

For a host of reasons, I feel this is just the beginning. Both gold and silver will do very well in the foreseeable future. 

I could be wrong. 

But that is the essence of all investment strategies, isn't it. You have to take a call and you have to act on your convictions. 

If you are wrong, you end up losing money or not doing as well you could have. It is always a risk. 

But what is life without risk? Even crossing the road involves risk. 

Why did the chicken not cross the road? Is what we should be asking, instead of the usual query of why he did. 

Because he was afraid to go to the other side! 

Because he was frozen with inaction! 

Because he never wanted to take risks! 

Hence, the chicken was doomed to spend his life on this side of the road.

Till one day, a speeding car anyway killed him!