Before buying gold, investors should understand the precious metal and how it behaves. Reuters
Before buying gold, investors should understand the precious metal and how it behaves. Reuters
Before buying gold, investors should understand the precious metal and how it behaves. Reuters
Before buying gold, investors should understand the precious metal and how it behaves. Reuters


Why all that glitters isn’t gold when it comes to investing


  • English
  • Arabic

April 18, 2023

Quick quiz: What has lower returns than stocks or bonds, but whips investors around more than either?

Answer: Gold, that glittery metal approaching record highs, drawing headlines and forecasts projecting higher highs ahead.

But beware: Always forgotten, succeeding in gold takes impeccable market timing or long-term pain. If you cannot time stocks, do not try gold.

Gold’s appeal parallels its 10.4 per cent rise through early April, bringing it back over $2,000 an ounce.

With last month’s bank failures, 2022’s equity bear market and hot inflation scaring us, many see the legendary “safe haven” as an alluring hedge against those threats.

Watch: US Federal Reserve raises interest rates by a quarter of a point amid banking turmoil

But before buying gold, you need to understand it and how it behaves. It is a commodity that has no earnings, adaptability or dividends.

Since 1974, when the gold standard finally ended, it annualised 5 per cent gains. Sound good? Certificate of Deposits (CDs) and Treasury bills pay that now.

Long-term US Treasury bonds annualised 6.7 per cent over that span. America’s S&P 500 Index doubled that, annualising 11.9 per cent.

Those lower returns make sense if it had low volatility. Gold does not. Consider one-year standard deviations for the three asset classes mentioned, a measure of yearly returns volatility around their averages.

Bonds’ standard deviation is low — at 8.3 per cent. You expect stocks' famously volatile standard deviation at 15.2 per cent. But gold’s is shockingly the highest at 18.6 per cent. More volatility. Much lower return. Bad combo.

Low returns with high volatility pinpoints a stark truth: To shine in gold, market timing is a must.

Gold’s gains can come big — but sporadically, with long stagnations and declines between. The recent pop above $2,000 illustrates this.

Now closing in on its $2,063.40 August 2020 peak, gold is only now, 32 months later, nearing flat. In parallel, US stocks rose by 28 per cent — despite last year's bear market. World stocks climbed 23 per cent.

Consider several darker realities: After a late 1970s boom, gold peaked at $850 in January 1980.

It hit that again in January 2008 — 28 years later. But first, it dropped 56 per cent over two years, gained 50 per cent in 18 months, fell 35 per cent in three years, rose 55 per cent over four years and fell steadily over the next eight years to 2001 — down another 46 per cent.

That next boom pushed gold to a record high of $1,895 in 2011 — but 31 years later. Consensus presumed even more gains ahead, especially with eurozone sovereign debt and banking fear exploding while equity markets endured a deep correction.

But no. Gold dropped 44.6 per cent through to 2015’s low, not regaining the $1,895 level until 2020.

If you can time that volatility, you surely need no advice from me. If you think you can, you are fooling yourself. Most investors buy gold high and much later — as frustration sets in — sell it low. It is timing or long-term low returns with wild volatility.

Similarly, gold climbed in just 57 per cent of rolling 12-month periods since 1974. Stocks? 81 per cent. Even if you cannot time stocks well, they work in your favour in the longer term. For gold, it is similar to a coin flip.

Recall: It is simply a commodity with limited industrial use — plus jewellery. Gold’s price swings increasingly come from swings in investor demand from exchange-traded funds, launched during 2000’s bull market.

So, timing gold requires timing sentiment swings. In my 51 years of managing money, I have seen no one with any reliable history timing sentiment swings … in anything.

If gold suddenly has your eye, ask yourself why. For many, it is the recent glittery returns. Chasing heat is a bad reason to buy anything. Some will insist it is about inflation or bear market hedging.

But 2022 disproves that. While stocks tumbled and inflation soared, gold peaked shortly after the war in Ukraine started — then fell in its own mini-bear market, bottoming shortly after stocks did — 5 per cent less but directionally the same.

Gold’s recent climb parallels the 15 per cent-plus rise. That isn’t what good hedges do. And no sane person buys gold to move largely parallel to stocks — but like a single more wildly volatile stock hoping it shines brighter — as is the case with Tesla.

Finally, rethink gold’s long profitless periods. Inflation was not zero in any of them. Hence, gold lost purchasing power to inflation each time.

Gold stocks instead? OK. And they may offer dividends. But as a group they are, again, more volatile than stocks overall and typically rise the most early in stock bull markets (and if you can time that, you can time the stock market).

Usually, they simply act in the same way as smaller value stocks, although they do add the magic of capitalism to the commodity.

If you can time gold, more power to you. But for most investors, stocks and bonds are simply better.

Ken Fisher is the founder, executive chairman and co-chief investment officer of Fisher Investments, a global investment adviser with $160 billion of assets under management

PSL FINAL

Multan Sultans v Peshawar Zalmi
8pm, Thursday
Zayed Cricket Stadium, Abu Dhabi

Cricket World Cup League 2 Fixtures

Saturday March 5, UAE v Oman, ICC Academy (all matches start at 9.30am)

Sunday March 6, Oman v Namibia, ICC Academy

Tuesday March 8, UAE v Namibia, ICC Academy

Wednesday March 9, UAE v Oman, ICC Academy

Friday March 11, Oman v Namibia, Sharjah Cricket Stadium

Saturday March 12, UAE v Namibia, Sharjah Cricket Stadium

UAE squad

Ahmed Raza (captain), Chirag Suri, Muhammad Waseem, CP Rizwan, Vriitya Aravind, Asif Khan, Basil Hameed, Rohan Mustafa, Kashif Daud, Zahoor Khan, Junaid Siddique, Karthik Meiyappan, Akif Raja, Rahul Bhatia

Yuki Means Happiness
Alison Jean Lester
John Murray 

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THE SPECS

Engine: 6.75-litre twin-turbocharged V12 petrol engine 

Power: 420kW

Torque: 780Nm

Transmission: 8-speed automatic

Price: From Dh1,350,000

On sale: Available for preorder now

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Tips to stay safe during hot weather
  • Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
  • Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
  • Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
  • Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
  • Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
  • Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
  • Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
ESSENTIALS

The flights

Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.

The hotels

Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.

The tours

A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages. 

Sole survivors
  • Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
  • George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
  • Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
  • Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
The Melbourne Mercer Global Pension Index

The Melbourne Mercer Global Pension Index

Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.

The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.

“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.

“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”

Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.

Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.

“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.

The National Archives, Abu Dhabi

Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.

Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en

Global state-owned investor ranking by size

1.

United States

2.

China

3.

UAE

4.

Japan

5

Norway

6.

Canada

7.

Singapore

8.

Australia

9.

Saudi Arabia

10.

South Korea

Cricket World Cup League 2

UAE results
Lost to Oman by eight runs
Beat Namibia by three wickets
Lost to Oman by 12 runs
Beat Namibia by 43 runs

UAE fixtures
Free admission. All fixtures broadcast live on icc.tv

Tuesday March 15, v PNG at Sharjah Cricket Stadium
Friday March 18, v Nepal at Dubai International Stadium
Saturday March 19, v PNG at Dubai International Stadium
Monday March 21, v Nepal at Dubai International Stadium

UK-EU trade at a glance

EU fishing vessels guaranteed access to UK waters for 12 years

Co-operation on security initiatives and procurement of defence products

Youth experience scheme to work, study or volunteer in UK and EU countries

Smoother border management with use of e-gates

Cutting red tape on import and export of food

The specs

Engine: 2.0-litre 4cyl turbo

Power: 261hp at 5,500rpm

Torque: 405Nm at 1,750-3,500rpm

Transmission: 9-speed auto

Fuel consumption: 6.9L/100km

On sale: Now

Price: From Dh117,059

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The years Ramadan fell in May

1987

1954

1921

1888

UAE currency: the story behind the money in your pockets
Getting there

The flights

Flydubai operates up to seven flights a week to Helsinki. Return fares to Helsinki from Dubai start from Dh1,545 in Economy and Dh7,560 in Business Class.

The stay

Golden Crown Igloos in Levi offer stays from Dh1,215 per person per night for a superior igloo; www.leviniglut.net 

Panorama Hotel in Levi is conveniently located at the top of Levi fell, a short walk from the gondola. Stays start from Dh292 per night based on two people sharing; www. golevi.fi/en/accommodation/hotel-levi-panorama

Arctic Treehouse Hotel in Rovaniemi offers stays from Dh1,379 per night based on two people sharing; www.arctictreehousehotel.com

The specs
  • Engine: 3.9-litre twin-turbo V8
  • Power: 640hp
  • Torque: 760nm
  • On sale: 2026
  • Price: Not announced yet
Updated: November 13, 2024, 1:45 PM`