Monday, 15 July 2013

Gold investment - should my goal posts be moved?

Crumbs! This is what my gold investment portfolio looks like this morning.

I knew it would be bad and I'm not sure if this is worse than I expected.

It's not a reassuring signal to myself that I know what I'm doing. Did I buy gold for the right reasons and have they changed?

Did I buy gold to make money? Or did I buy gold to protect myself?
I think mainly the latter, which if it had happened would have led to a bit of the former (although I imagine the value of everything else I own would be less secure).
Have either of these goals changed - do I have less of a need to protect myself?
Yes I think so - I don't feel like the financial crisis is really dead.
Is gold still top of my list of assets to own to achieve this?
That's a harder question. That's not just because of the state of my account above. But I think yes it is still a good option for me.

I know I don't really understand how gold will behave in high inflation or deflation or in circumstances where interest rates rise due to fear rather than growth (or vice versa). But then I don't really understand how other assets will behave in these circumstances either.

One thing that's stopping me from jumping to any conclusions about my gold investment is this lack of knowledge.

I'm reading Steve Keen's 'Debunking Economics' and while I can't claim to understand all of it, it has helped me see that there is a lot of room for other people to make mistakes too.

His view is that Keynesians have muddled up uncertainty and risk in a way that Keynes (of the barbarous relic quote) would not have done.

He quotes Keynes: 'Knowing that all our individual judgement is worthless, we endeavour to fall back on the judgement of the rest of the world which is perhaps better informed. That is, we endeavour to conform with the behaviour of the majority or the average. The psychology of a society of individuals each of whom is endeavouring to copy the others leads to what we may strictly term a conventional judgement.'

This could mean a lot of things for a gold investor. But I suppose it will depend on their view of the information they have about the gold market - about their view of whether investing in gold is really an unconventional judgement.

At the moment, to me, it appears to be a less complicated strategy and, if it fails to make me money hopefully it's because the world is a happier place.

I would like to know more about whether it could fail in circumstances where it should provide protection.

I don't know if I will buy any more - if I have some spare cash I might do it - or put something into BlackRock Gold and General .

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