Please be mindful of my recent blog on the bandwagon effect http://bridgewaterfs.co.uk/2019/12/13/2019-election/well now seems the perfect time to re-stress some of the principles that I mentioned in the blog. Especially given the very real panic that Corvid 19 is causing both in the real world as well as the financial markets.
Specifically I want to address the recent activity in the Gold Market that has seen prices soar, as investors move assets into the perceived safety of this form of asset.
Why it’s not the right time to buy gold
The price of gold has just halted as investors who were in for the longer term are taking their profits now. However with the traditional jumping onto the gold bandwagon in times of market volatility, for the normal investor there probably won’t be any killings to be made.
There is in fact, a real danger that you’ll be jumping to gold at or near to the top of the market. Meaning that unless you’re investing vast amounts into gold, there maybe little return to be made. Plus you have the very real concern of the journey back down, as the price of gold more properly reflects its place in the grand scheme, once the markets recover – and recover they will.
It might be the right time to consider selling
If you’re currently in the gold market and have been prior to the Corvid 19 prompted Gold Rush, then you may well be in a position where selling your investment could result in a higher than expected return. Especially as those desperate to hop onto the bandwagon are still keen to buy your gold at the current inflated market price.
Markets are in it for the long term
You should be too.
There have been many triggers for a run on the gold market over the past few decades. Investors get spooked as they know that the markets hate uncertainty; and pandemic viruses spread uncertainty as fast as they spread panic.
The tourist industry suffers, large-scale events get cancelled and the crossing of borders with people and goods becomes difficult or impossible.
All of this has the effect of depressing the markets and causing many of the larger investors to opt out of their usual activities. Hence they buy gold, or other ‘safe’ commodities, and sit the storm out.
They know that the storm will blow itself out, because it always does. They also know that when they get their timing right and return to the investment markets, they’ll be able to buy back in at an advantageous price. With this rush back to the investment markets driving values back to the levels they were prior to abandoned them to buy gold in the first place.
Ask any comedian and they’ll tell you it’s all about timing
However, abandoning the investment market in favour of the gilt-edged bandwagon could mean that the joke’s on you.
There really is no need to panic or react, as the markets always return to normal, once whatever it is that it making them jumpy passes.
Trust the past, because the one thing history has taught us over and over again, is that these things blow themselves out. Just like they did when SARS (2003), Swine Flu (2009) and Ebola (2014) caused similar panic selling.
In fact, the only time to ever change your direction of portfolio, is when your end destination changes, not because of any temporary bumps in the road.
A calming influence over troubled waters
As always, were here to help, whenever you need us. If you do have any further questions regarding anything I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.