One Sort of Right, One Sort of Wrong!

It is always a useful if sometimes a salutary exercise to review one’s investment predictions. Sometimes you get it right and sometimes wrong. Some recent blog posts highlight this for me. In my post “Equity Rally, Equity Income & Monsters,” of 27/1/13  I suggested the second quarter could mark a downturn in the stockmarket rally. In the last few weeks as we ticked over into April equities ran into headwinds and have been trending down. There was no great skill here – I just guessed that investors would get nervous at strongly rising prices since the autumn of 2012 and would take money off the table. Longer term however equities remain my favoured asset class.

One I sort of got wrong was the suggestion in the post “Gold – in Bubble Territory or a Good Investment?” on 27/3/13 that gold could be a good investment. Prices have been trending down in recent months and since the August and September 2011 highs of around $1,900 per ounce, but on Friday 12th and Monday 15th of April there was an extraordinary and savage sell off. The current price of gold is $1,408 per ounce at the time of writing. This crash was triggered by a variety of factors such as Cyprus potentially selling their gold reserves, a more significant scenario would be if repeated by Spain and Italy and that technical support levels of the price of gold were breached. This is all in the context of a 12 year bull market and hence fears of a bubble and signs that money printing or quantitative easing by central banks could be coming to an end. QE causes currency debasement and inflation which is favourable for gold.

I said I got gold sort of wrong in the sense that it would have been a rotten idea to have invested at the time of my blog post. That said the fundamentals and long term case for gold seems attractive for me and at current prices there is a case for buying when everyone is selling. I am still hearing strong advocates for gold. They are suggesting it is a screaming buy. I am certainly not that zealous but I can see their point.

You should take individual advice before making investment decisions.