It makes sense to buy gold

There is a stubborn intellectual conceit that investing in gold is irrational, says John Stepek. But gold is the only long-term store of value. And in these turbulent times, it's sensible to hold a portion of your portfolio in the yellow metal.

What is gold's true value? Both the FT's Lex column and The Economist have had a crack at answering this in recent weeks.

The Economist uses an elaborate method of taking the gold price in a range of currencies backed by a sound balance sheet', including the Canadian loonie and the Swiss franc, and comparing the current price to the historical average. Even against the safe haven' of the franc, gold is overvalued by 60% on this basis. Lex is less thorough. It notes the "price is still about 30% below its January 1980 peak, adjusted for inflation". But then again, it adds, there's "no reason for gold to sell at any particular price".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.