Gold proves its worth

The pandemic has been good for gold. And, while you must keep holding gold (inflation is coming), you must not ignore the return of our old lives, says Merryn Somerset Webb.

Gold bars © Getty Images/iStockphoto
We’ve always told you to keep a stash of the stuff
(Image credit: © Getty Images/iStockphoto)

We’ve been boring MoneyWeek readers for years about the importance of holding gold. It should have, I said in 2002, a natural place in your portfolio as a “financial hedge in troubled times”. It was trading at $320 an ounce then. It’s now around $1,950. Not bad for what the naysayers dismiss as a “pet rock”. You’ll have things in your portfolio that have made you more in the last 18 years. But gold has certainly proved its worth in these troubled times. Will it go higher?

You don’t have to look far to see why it might. There is Covid-19 itself, and the possibility of the much-discussed second wave which Boris Johnson thinks he sees signs of in Europe. There is the response to the virus – the quarantines and restrictions that will limit some activity and prompt yet more monetary and fiscal stimulus. Then there is the US election (95 days to go). The polls show Joe Biden in the lead and if the level of global stimulus already makes you nervous about the integrity of fiat money (should you believe it still has any), his pure printing-financed plans for a $7trn spending package should make you really nervous. Biden’s policies will take us all a giant step closer to the monetary end game that finally disconnects spending from any pretence of reality. Add to this the fact that the opportunity cost of holding gold as insurance against misery and inflation has fallen (nothing else has a yield either) and it is hard to be surprised by its rising price.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.