James Rickards, author of the blog The Daily Reckoning, offers his views on gold, and their ways of investing in the metal - based on AMarkets.
Those investors who focuses on physical gold, the expert recommends buying no more than 10% of risky securities (shares, derivatives, etc.). More than 10% - does not make sense, as it is necessary to sit too close to the market, the news and deal with increased volatility.
Those who have no investment in physical gold, Rickards advises to buy the metal, considering the current prices for the optimum input for the last 6 years. Rickards did not deny that gold investors are not experiencing the most peaceful times. In mid-1999, the metal was trading at $ 250 an ounce. By August 2011, the metal soared to $ 1,900 per ounce. 600% growth - a great rally! Then came the gold to dark times. First, the metal sank to $ 1,400 per ounce by the end of January 2011, all rubbed $ 500 in record period of 7 months. By July 2015 the metal fell to $ 1,100 an ounce. In this scenario, the 15-year dynamics of metal still shows a profit from investments at the level of 350%, however, a 4-year schedule already talking about a loss of 40%. Those who entered the gold in 2011, are still, as they say, "under water." And many investors have already merged gold, fiercely hating him for past losses.
On gold affects three factors - says Rickards: interest rates, the strength of the dollar and the Fed's intervention.
Interest rates - one of the best tools for predicting future metal prices - in nominal dollar terms. At high rates, metal prices are falling. The correlation is not entirely smooth, but smoother than any other correlation. Gold has no yield. And if the assets that have yield (stocks and bonds), grow the appeal of gold decreases. Ie Gold is closely tied to the real interest rate (nominal interest rate minus the inflation rate). Over the past few years, the nominal interest rate on 10-year trezheris (them easier to compare) was at 2%, inflation - at the level of 1%. Ie real interest rate on 10-year notes was at the level of 1%. If we compare the current situation with what it was in 1980, then gold soared to yet another peak at $ 800. Then trezheris rates were at 13%, and inflation - at 15%. Ie real interest rate was negative - minus 2%.
Thus, to assess the current and future prospects of gold - it is necessary first to assess the dynamics of real interest rates.