According to a recent Bankrate survey, one in six investors prefer gold investments as the best asset to invest their money in 2016 if they would not need for at least 10 years. That is remarkable, as it is the same percentage investors that prefer stocks. Bonds are only prefered by 6% of investors, real estate by an astonishing 25%, and, ironically, 23% said they would simply bank the money.
It is no surprise that gold investments in 2016 have gained in popularity. Gold and related investments are back as ‘safe haven’ investments as 2016 has been a year, so far, with a lot of uncertainty in geopolitics, markets and monetary policies.
The investment landscape is changing driven by changing geopolitical and monetary dynamics.
Michael Kosares from USAgold.com picked out an interesting quote from a recent Financial Times column (Brexit and the power of wishful thinking) in which author Tim Hartford sheds some light on the psychological transformation now taking place among investors:
“Perhaps the most important lesson is that we spend too much energy trying to foretell the future, and too little trying to be resilient whatever happens. . . Because scenarios are persuasive stories, they can help us face up to uncomfortable prospects and think clearly about possibilities we would rather ignore. And because scenarios contradict each other, they force us to acknowledge that, in the end, we cannot actually see into the future. As a result we move from ‘What will happen?’ to ‘What will we do if it does?'”
Kosares rightfully observes that, in order to become “resilient whatever happens”, requires acting before, not after, the next financial crisis headlines the evening news. He writes:
Many now reject the old financial religion that diversification amounts to the proper blend of stocks and bonds and little else. That formulation was acceptable when the money was sound and the federal government had not buried itself under a $19 trillion pile of debt. It held sway when confidence was running high and considerably more of the population than 17% were satisfied with the direction of the country (a polling number recently reported by Gallup). Now investors are looking to add safety and liquidity to their portfolios to augment the pursuit of capital gain, and, as the Bankrate survey shows, are now turning to the preeminent safe haven – precious metals.
Even Willem Buiter, chief economist for Citigroup and a long-time critic of gold, now says he would own the metal. “Gold, in times of uncertainty and especially in days of uncertainty laced with negative rates, looks pretty good,” he concedes. At the same time, he sees stocks as in a bubble. He believes investors are “pinning their hopes on a long-term growth of corporate earnings which bear no relationship to underlying economic growth.”