Ask Paul: We bought $200k of gold, is it time to sell?


Dear Paul,

My husband and I are close to retirement.

With that in mind, we bought $200,000 of gold as a mid- to long-term investment hoping to capitalise on the expected price growth in the coming years.

ask paul clitheroe we invested in 200k of gold is now the time to sell

My question is, would the growth in the gold price be vastly offset by the strongest Australian dollars we also expect to see in the coming years, making the investment disappointing?

It's now a breaking point to decide whether we should cut the investment if it breaks even in the coming days. - Sal

Goodness, you have got me in a pickle here, Sal.

First, I have absolutely no idea what the Aussie dollar will do. I've been writing about this for many decades. One of my favourite activities is to keep our leading economists' predictions of the dollar and reviewing these each year. The reality is no one is consistently correct.

Our economy is tiny and the dollar will bounce around depending on our resource prices, interest rates and general global sentiment. My best guess over the decades has been to buy Aussie dollars when they get close to 50 cents to the US dollar and sell when they get to around $1 to a $US1. This is probably the most unsophisticated plan I have ever heard of, but it is as good a guess as any.

Now to gold. I am a real believer in history and I get the role gold has played for thousands of years. In a real crisis, I'd certainly hold gold over cryptocurrencies! Many European families in particular have traditionally bricked small gold coins into a wall in their homes to be retrieved during times of war and invasion.

With a growing global population and what is clearly a limited supply of gold in the ground, it is hard to see gold having no value. So I am okay with an argument that it will go up in value over the long term. But in the short to medium term, I have no idea.

What I don't like about gold is that it produces no income and generally it costs money to store and insure it, so I prefer to benefit from gold by holding gold shares. I accept that holding a percentage of your portfolio in gold is a good hedge against inflation and a portable way to hold wealth in a crisis.

This background information does not answer your question. The answer is very personal to you.

If your gold holding is a small part of your portfolio, it could stay as a hedge. If it is an important amount of money to you and you would like an income return from your investment, it is pretty hopeless. In terms of the short-term price of gold and movements in the Aussie dollar, your guess is at least as good as mine!

You seek the answer to the question: will the dollar rise or fall and the gold price rise or fall, giving you a very nice profit or a potential loss.

I can only apologise, as I don't know.

I wish I did - I would be very rich!

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.