1. Do you think people’s gold investment allocation should change in today’s economy? Why or why not?
The traditional mix or allocation that includes 10-15% in Gold is not typically followed in my office, especially for qualified accounts and ROTH IRAs. This strategy is because of the importance of the RULE of 72 and the impact that “over-diversification” has on long-term returns. In my opinion, adding permanent allocations that historically or by design cause a portfolio to underperform what could have been just to avoid what is often temporary volatility does not make sense. However, we do this with specific accounts and use gold ETF allocations of 20% during favorable environments during market downturns. Trying to time the market in and of itself is risky and should be closely monitored. It seems to make sense to have a strategy in managing money accounts, such as using gold ETFs, Treasury Bills, and a money market as a defensive position until the market turns positive. It would depend on the investor's objectives and time frame.
2. When would it make sense for investors to INCREASE their gold allocation, even with Gold’s recent strong performance? How would you recommend they go about doing so? (e.g., dollar cost average, go all in?)
It can make sense to be in Gold while it is up, and the market is down. However, I would not view gold as a buying opportunity for long-term growth because it is currently up. We use a strategy that historically has been able to detect equity market declines and when to use gold ETFs as a short-term investment opportunity. This strategy has historically been effective during times of market volatility.
3. When would it make sense for investors to MAINTAIN traditional allocation levels, and why?
I disagree with the traditional allocation strategy for most clients. We recommend identifying the objectives and goals of the investor and making an appropriate allocation. If the client has a long-term objective, they are likely better off in a good mix of mutual funds. I recommend that clients learn about and invest with the RULE of 72 always in mind.
4. When would it make sense for investors to DECREASE their gold allocation levels and why?
It may make sense to rebalance and sell some or all gold holdings while it is high. Again, it depends on the account's allocation, objectives, and time horizon. Capturing gains could be a good strategy.
6. For someone new to Gold investing today, which investment vehicles would you recommend and why? (e.g., physical Gold, ETFs, etc.)
We use only gold ETFs and usually only use them as short-term holdings. Buying Gold for long-term investing has historically trailed the equity markets or returns offered through good mutual funds by a significant margin. Gold is often sold by using fear as a motivating factor.
You may see physical gold offered as a means of safety against the dollar's collapse or economic collapse. Interestingly, those selling physical gold to clients to protect against the dollar's collapse often do so for dollars. They are getting rid of Gold in exchange for dollars. Could the motivating factor be up-front and possibly even back-end commissions? If they believe that gold is such a valuable investment that it is going to continue to rise at the same time the dollar or monetary system collapses, why are they taking dollars in exchange?
7. What are the biggest risks investors should be aware of when investing in Gold in the current economic climate?
One of the biggest risks of buying gold while it is up in value is that when the equity markets calm down, gold is likely to decline in value. Be intentional and informed with a strategy that is being monitored would be my advice.
8. How might an investor’s age and financial timeline influence their gold allocation strategy?
I think age and timeline are huge factors. I do not see how, historically, holding gold as a long-term investment makes sense compared to equities or bonds.
9. What’s your most important piece of advice for investors questioning their gold allocation strategy today?
I would suggest they work with an investment advisor who will educate them and help them formulate a solid strategy. Never act out of generated fear or FOMO, the fear of missing out.