The investor discussed many important factors for investing in capital markets in this article. One that caught the attention of many investors is the section on gold and the guru’s assumption that this precious metal will bring excellent returns to investors in 2020. However, at the time of publication, equity markets were still in motion, and many investors had little reason to allocate some of their portfolios to a safe haven like gold that would only gain in value if risky assets fell. Many market commentators and analysts rated this as unlikely.
Fast forward to today and Dalio has already emerged as the winner. With renewed fear of slowing global growth, gold demand has risen sharply in recent months, pushing prices to new highs.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Last October in one items Published on GuruFocus, I mentioned four reasons why Dalio could be optimistic about this precious metal. Since then the gold value has increased by 10%. Even with such gains, it may not be too late for investors to go on board with gold investments. “Data-reactid =” 37 “> Last October, in an article published on GuruFocus, I mentioned four reasons why Dalio could be the upward trend in this precious metal, and since then the value of gold has increased by 10%, even because of such gains it may not be too late for investors to get on board with gold investments.
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It’s not just about generating alpha returns“data-reactid =” 38 “>It’s not just about generating alpha returns
When stock markets outperform all other asset classes, investors conclude that the whole idea of investing is to get alpha returns at any price.
While the idea behind active investing is to get better returns than an index, choosing the right companies to invest in is not the only way to do that. The trick is to build a balanced portfolio that can withstand all market conditions. Such a basket of investments is likely to bring the best returns in the long run as investors, analysts and economists can never predict the next market downturn.
Gold prices have risen in the past few months. There is no proven method of calculating an intrinsic value for this metal since the price often depends entirely on the supply and demand in the market. It is therefore important to recognize that gold has little or negative correlations with equity and bond markets worldwide and that this relationship is a natural hedge against a market slump.
Source: State Street Corporation
An investment in gold should be viewed as insurance against poor capital market performance. Under normal market conditions, this allocation may not provide an alpha return. However, it matters when there is fear. So I believe there is no reason why investors should not be exposed to this metal at today’s prices. Even if the threat of the outbreak of the new corona virus diminishes in the coming months, another external force will disrupt the markets at one time or another. Being prepared is the best thing investors can do today.
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A few more reasons“data-reactid =” 60 “>A few more reasons
Even after the recent surge in gold demand, the allocation of gold to investors is still below historical averages, according to Bloomberg.
Benjamin Jones, a multi-asset strategist on State Street, told Bloomberg on Wednesday: “There is room for further demand, especially on the ETF side. Investor participation in gold is still weak.”
Next, there is still a possibility that Covid-19 will become a global pandemic, although the World Health Organization currently sees no reason for such a classification. The United States reported a new case yesterday, and the situation in Italy and South Korea is not looking good. Under these circumstances, fears of recession will remain a feature of the markets in the coming months.
However, as I have emphasized in some of my recent articles, the negative impact on the global economy is likely to be short-lived. However, preparing for the worst is not a bad strategy as market performance will never be as smooth as some investors expect.
Gold has outperformed all other asset classes in the past three recessions.
In addition, there is reason to believe that gold will continue its upward trend even after fears of coronavirus have subsided, mainly because the global economy was expected to grow more slowly this year.
Sprott Inc.’s chief executive officer told Kitco News on Monday:
“What the corona virus added was a shock to the economy. I would call it a straw that broke the camel’s back. The economies shuffled along with a lot of weakness in Europe and China at best, and this will only make things soar float.” the edge.”
He added that there is a great possibility that gold will cross the $ 2,000 mark for the first time in the second half of this year.
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Snack: It is not too late“data-reactid =” 110 “>Snack: It is not too late
<p class = "Artboard-Atom Artboard-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ray Dalio (trades, Portfolio) repeatedly asked investors to consider investing in gold in 2019 and 2020 as risky assets may not produce the desired returns in the near future. Ignoring this hint has already proven to be a costly mistake. Even though it may not be the best time to invest in this precious metal (the best time was months ago), the window of opportunity still seems to be open. Even after the markets have stabilized in a few months, gold could continue to gain ground. In any case, the diversification advantages that this asset class offers investors are crucial in order to achieve sustainable long-term returns. “Data-reactid =” 111 “> Ray Dalio (trades, portfolio), multiple times in 2019 and 2020, urged investors to consider gold exposure as high-risk assets may not produce the desired returns in the near future Ignoring this hint has already proven to be a costly mistake, and while this may not be the best time to invest in this precious gold (best time was months ago), the window of opportunity still seems to be open after the markets stabilize in a few months, gold could gain further ground. In any case, the diversification advantages of this asset class benefit. It is crucial for an investor to achieve sustainable long-term returns.
In January, Greg Jensen, Co-Chief Investment Officer at Bridgewater Associates, shared three catalysts with the Financial Times that could help gold prices rise above $ 2,000 this year:
- A permanent shift in the Federal Reserve’s monetary policy to keep interest rates at a record low and support economic growth.
- An escalation of geopolitical tensions in the Middle East and China, which would lead to a permanent slowdown in economic growth in these regions.
- Political turmoil in the United States later this year.
The thinking of the world’s largest hedge fund is clear. There seem to be different developments in different regions of the world, which point to lower growth than expected in the coming years. Because of these factors, it seems to me that the right decision to jump on board within three months, even after a 10% win.
Disclosure: I own SPDR Gold Trust (GLD) ETF shares
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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This article was first published on guru Focus,
“data-reactid =” 127 “> This article first appeared on GuruFocus.