Gold Sparkles as "The Great Lockdown" Hammers the Global Economy
Gold and gold stocks are among the highest performing assets of 2020 so far as investors seek a haven amid the coronavirus-fueled rout, and as central banks and governments around the world roll out unprecedented monetary and fiscal measures in an effort to mitigate the economic impact of the “Great Lockdown.”
That’s the name the International Monetary Fund (IMF) has given this uncertain period, and I believe it may stick. The IMF added that the “world economy will experience the worst recession since the Great Depression,” with global economic growth this year projected to fall to negative 3 percent.
This highlights the importance of protecting your family’s wealth right now, which savvy investors have historically managed to do with gold and precious metals.
Physical gold was up about 13.8 percent through April 10, while senior gold miners advanced 2.8 percent, making the group the best asset class of the year so far. Longtime readers of Frank Talk know that I frequently recommend a 10 percent weighting in gold and gold stocks, and now you can see why. A 10 percent allocation at the beginning of the year—before any of us had ever heard of the novel coronavirus—could have helped minimize the impact of losses in other positions.
The problem is that too few investors have adequate exposure to the yellow metal. That’s the case even for many who may believe they do. As the World Gold Council (WGC) pointed out last year, most broad-based commodity indices have a very small weighting in gold—the S&P GSCI’s, for instance, is only 3.37 percent. What this means is that investors in funds that track these indices likely do not get the full benefit of having gold in their portfolio.
That’s why I recommend that the 10 percent weighting be split into two halves, with 5 percent in physical gold (bars, coins, 12-karat jewelry) and the other 5 percent in high-quality gold and precious metal mining stocks, mutual funds and ETFs.
Maybe you’ve missed the rally up to this point, but the good news is that it’s probably still not too late to participate.