Cover of MoneyWeek magazine issue no 636

Is it all over for gold?

19 April 2013 / Issue 636


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Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

Why I’m sticking with gold

I wrote a letter here in December 2011 saying that I intended to sell down my gold holdings. Some of our long-term readers were shocked. But it made good sense to me.

I’d bought my gold over a decade earlier, when it was trading at under $300 an ounce. As it had risen to over $1,500 it had begun to make up far too high a percentage of my portfolio – and that wasn’t the no-brainer it was back in 2000. Three hundred dollars was unarguably cheap. Over $1,500 wasn’t.

At the same time, the US (and the housing market in particular) looked like it was beginning to show signs of recovery.

I always have in mind a point that Tim Price made to me when this crisis kicked off. “This all started with the US housing market”, he said. “It will only begin to end when that recovers.” So there seemed a faint chance in late 2011 that we were nearing the beginning of the end of the crisis, and I changed the way I looked at gold as a result. Instead of holding it as an investment, I started seeing my holding as pure insurance.

That doesn’t mean last week’s crash didn’t hurt. But it does mean I won’t be selling more.

• Read the full editor’s letter here: Why I’m sticking with gold.