Some points to consider before you dabble in the yellow metal.
? Even the best economists can make mistakes when trying to read this difficult market. Just ask UK finance minister Gordon Brown, who from 1999 to 2002 led a series of gold auctions by the Bank of England. It seemed like a perfectly good idea at the time. But when you consider that the last auction in March 2002 sold 643,200oz of gold at a mere $296.50/oz, and that at the time of going to press the price is nearer $370/oz, it doesn’t look so clever in retrospect. All things being equal, at today’s prices that particular auction would have raised over $47 million more than it did: enough for a couple of schools. Let’s hope that those central banks that are now buying gold instead of holding dollars are not making a similar mistake and loading up at the top of the market.
? Even gold strategists do not encourage the uninitiated to take a punt in bullion. “I would discourage it,” says Merlin Marr-Johnson, a gold strategist at HSBC in London. “The choice of buying gold is a calculated risk based on the rest of the system. However, it can be suitable for high-net-worth individuals who are accustomed to it.”
? If you do decide to buy bullion, make sure you tell your boss. Senior executives at some investment management firms were apparently horrified when fund managers took part in the Bank of England’s gold sales, as they had no way of storing the physical gold.
? Gold equity analysts have been upgrading their views on these stocks for several weeks, so most of the benefits have already been priced in. If it is true that analysts are the last to spot a bull market, then this could be the time to sell.
