Friday, 18 May 2012

Gold back over £1000 per oz - will it stay there?

As the price of gold tumbled earlier this week I mentally scrambled for the reasons why I had bought the stuff in the first place.

Yesterday and today's price rise - which took gold back over £1000 per ounce - eased my anxiety but there are still a number of issues I need to look at.


The convention is that responsible investors should understand themselves and their circumstances before investing (Which? guide).

There are questions I should have asked myself like “can I afford to invest?” And if yes: “what assets should I invest in?”

Conventionally speaking I can’t afford to do this. But I have done it anyway. Neither have I properly compared the merits of gold with other assets - cash or shares or bonds.

The reason I think I bought gold is because I used to write about it and I found it interesting. I also thought I must know something valuable about it.

I didn't know that this was the extent of my investment strategy and gold-owning rationale. Or rather I didn't bother close inspection until I found I had put quite a significant chunk of my cash into gold… and the price of gold started falling sharply!

Luckily  it’s not the first time fear has forced me to seek a coherent gold owning rationale. I still haven't done it, but I’m hoping I’ll get on with it now, whether the price of gold carries on up or down.

Portfolio

The losses on my physical gold ETFs have moderated while the losses on the gold mining shares have escalated again - down 24% (last week I bought £250 more units when my holding was down 20% - so I didn't catch the falling knife, I lost a finger). If I haven't learnt by that mistake, the next buying opportunity is on Monday - I would have to put in an order before 8am and it wouldn't go through til midday.



My ETF holding is down 3.5% with question marks still hanging over the state of the gold market and the strength of the pound.

Sterling gold vs dollar gold ETFs:



Today BullionVault's daily round-up highlighted

Yesterday (Thursday May 17 ) BullionVault reported Marcus Grubb at the World Gold Council saying gold would become a haven again and that China was a bigger gold importer than India.

On Wednesday 16 May BullionVault reported analyst Axel Rudolph at Commerzbank in Luxembourg saying: "Over the next few days a minor bounce back towards the breached 2008-12 uptrend line is likely to be seen before another down leg rears its head, probably by next week."

This is the price at which I bought 10 PHAU shares on 9 May.



If I had sold them today I wouldn't have covered the costs






But it would have cost me more to buy today. 








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