Insights on Owning Gold

In a recently published article in Advisor Perspectives, Robert Heubscher interviews First Eagle Investment’s Thomas Kertsos to gather the research analyst’s insights around owning the precious metal. Here are some highlights:

  • Current trends in the gold market: “We see that the Fed communications about rate hikes and election outcomes continue to be significant drivers of the gold price in 2017, exactly as they were in 2016.”
  • Why hasn’t the price of gold increased more since 2008 (given the high degree of “money printing”)?  Because, says Kertsos, real interest rates have increased over the past few years as there has been strong economic growth.  He argues that as long the expectations remain that money printing works and we are going to experience economic growth, any gold price upside will likely be limited.
  • Why do you think gold is an ideal hedge? Few financial or real assets, says Kertsos, have such a unique track record in terms of performance during adverse economic and geopolitical environments.
  • On Warren Buffett’s assertion that it’s better to own productive assets than an inert metal: “There are two ways to invest,” says Kertsos; “invest to strive to become rich or invest to remain rich. Gold serves the latter purpose. For purposes of seeking wealth preservation, businesses don’t have the same track record as gold does.”