Gold Fever: Myths, Memories, and Market Reality

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Welcome to Something More with Chris Boyd.

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Chris Boyd is a certified financial planner, practitioner,

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and senior vice president and financial advisor at

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Wealth Enhancement Group, one of the nation's largest

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registered investment advisors.

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We call it Something More because we'd like

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to talk not only about those important dollar

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and cents issues, but also the quality of

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life issues that make the money matters matter.

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Here he is, your fulfillment facilitator, your partner

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in prosperity, advising clients on Cape Cod and

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across the country.

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Here's your host, Jay Christopher Boyd.

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Welcome to another episode of Something More with

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Chris Boyd.

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My name is Jeff Perry.

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I am a financial advisor who works with

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Chris Boyd, and Chris is on vacation today,

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so I have the privilege of sitting in

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for him.

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And joining me is our senior portfolio manager

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for our team, Brian Regan.

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Thanks for joining me, Brian.

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Good to be here as usual, Jeff.

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Hope you're doing well today.

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I'm doing great.

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Summer is coming to an end.

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The official summer, anyway, is coming to an

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end.

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The kids are getting back to school or

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off to college or whatever the kids are

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doing.

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And so it's a time for transitions, I

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guess, into the fall.

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Any changes in your world?

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My daughter is not yet in school, so

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that's a challenge.

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She's off at her grandparent's house in New

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Hampshire right now, having a great time.

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My son is luckily or unlucky, depending on

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how you view the pay I have to

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send them, and still in daycare.

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So that's fun and reliable.

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But yeah, it's exciting.

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My daughter's heading into kindergarten, so it's going

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to be an interesting time in our lives.

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Yep, they certainly do grow fast.

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I can't believe that I'm saying this, but

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last weekend we helped move our granddaughter, Faith,

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into college.

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She's in New Hampshire at a college and

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running on the college team and experiencing all

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those new things about living on her own

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and starting this next part of her life.

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So exciting times for her as well.

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That is exciting.

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I love college.

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I wish I could go back.

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We always want to go back to things

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that we didn't appreciate when we were there.

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And I did tell her that.

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I know it meant nothing to her, but

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I did tell her these could very well

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be the best times of your life.

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I actually think I did appreciate it.

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It doesn't mean I don't miss it.

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It was great at the time, and I

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just think fondly about it.

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Well, good luck to all the students returning

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to school and the parents who are dealing

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with emptiness or the challenges of daycare and

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childcare and grandparents and all that.

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A lot of things change this time of

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year.

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Brian, today I wanted to talk about an

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article that you wrote, and it's also a

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subject that comes up with our clients, I

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don't know, more frequently than I might think.

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And it's the subject of gold, meaning should

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I buy gold?

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Should I have gold in my portfolio?

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I think you wrote this article in part

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because you've gotten so many requests from clients

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to answer their questions about gold.

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Is that right?

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Yeah, it comes up all the time.

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So I actually just titled the article, I

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get asked a lot about gold.

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I was thinking about titling it, and I

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was like, I don't know, this seems to

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work.

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This is pretty simple, but it's the truth.

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It's why I wrote the article.

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It's my two-page response to what I

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think is a good time to invest in

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gold or when I think it's an opportune

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time.

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And it might be what I find interesting,

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and I think it flies in the face

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of a lot of the common assumptions that

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people think or a lot of the common

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reasons that people come to me for investing

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in gold.

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I think oftentimes they're far off base or

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they haven't thought of...

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Whenever I go into any investment, I like

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to think, well, why do I think it's

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going to go up?

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And when would I want to get out

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of it?

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Under what circumstances?

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And I think that's not always thought through

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from the folks that come to us, and

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that's what this article was trying to hit

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on.

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On a personal basis, I have never, even

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in my younger years when I was just

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starting out and accumulating assets, all through my

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savings years and various careers, and now getting

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near the end of my professional careers and

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thinking about the decumulation phase, I never...

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I mean, I know gold exists as an

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investment, but I've never thought about it.

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Should I have it in my portfolio?

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And I see the times that now that

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I've been working with you guys for the

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last five years, I hear it from clients,

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so I think about it a little bit

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differently, but the times I see it most

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and think about it for a second is

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when I see those TV ads that are

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promoting, sometimes late at night or sometimes on

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partisan news channels that are, after one segment

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of fear-mongering, I'll equal distribute to left

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and right, or when I see it in

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the context of some retail show selling gold

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coins to the public.

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And so I see that, but I just

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never really thought it should be part of

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someone's portfolio.

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When you were studying and throughout your years

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of managing money, has it ever come to

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you like, this is an inappropriate asset to

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put in my client's portfolios?

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Yeah, there was a time, there was a

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good stretch from, I don't remember, the summer

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of 2019 to probably the end of 2020,

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when we did have clients invested in gold.

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And the way I look at it, we're

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kind of jumping to the end of the

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article, but that's fine, all around.

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The way I look at gold is as

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a currency, a global currency with a perpetual

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0% interest rate risk.

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So put that into contrast, all the other

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currencies in the world have a government bond

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associated with them, at least all the developed

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currencies in the world.

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So if you hold dollars, you can effectively

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get a four and a quarter, 10-year

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risk-free rate of return right now by

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taking those dollars and investing them in treasuries,

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which is very easy to do.

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You cannot do that with gold, right?

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You can't get a risk-free rate of

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return.

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It doesn't have any cash flows associated with

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it, but it does have historical roots as

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a currency, and it's still viewed that way

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by the capital markets as a store of

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value.

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And we can get into how that's been

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put in overdrive lately and why I think,

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when we talk about why I think it's

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gone up in value as of late.

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But when interest rates, all else equal, right,

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and that's always a key phrase when we

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talk about anything, there's usually a lot of

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variables pulling on different assets throughout the world.

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But all else equal, if interest rates are

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falling, global interest rates are falling, then gold

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becomes more competitive on a relative basis, right?

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Because it's always zero.

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So if we go from a 4%

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interest rate on the 10-year to a

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3% interest rate, well, then gold just

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became a little bit more competitive versus the

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dollar.

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And the more you have that throughout the

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globe, the more competitive gold is.

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So if you remember back when we had

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very low and even negative interest rates in

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parts of the globe, and then the Federal

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Reserve started cutting, and that was in 2018

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to 2020, that's when we were in gold.

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And that's the logic I use that makes

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sense to me when investing in gold.

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And gold doesn't have consistent, strong correlations to

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much.

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So you really need to think about it

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in the context of something that makes sense

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to you, so you know that you can

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consistently and realistically get in, and then ultimately

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get out at a time that makes logical

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sense to you.

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It kind of goes back to just knowing

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what kind of asset you own and why

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you own it, right?

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That can lead into, when people come to

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me and they want to buy gold, why

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do they want to?

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I mean, there's different reasons, sure.

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But isn't the primary belief by many, it's

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a hedge against inflation?

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It's going to protect you.

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Yeah.

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So that's, you know, jumping up to the

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top of the article.

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I'm all around.

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Yeah.

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It's good.

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It makes me think, right?

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The number one reason why people come is,

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I think they're afraid of inflation.

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And, you know, there is some recency bias

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there because we experienced some pretty severe inflation

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just a few years ago, and it's still

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relatively high.

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You know, we're talking 2.9% on

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core CPI and 2.7% on the

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headline CPI.

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So it's still fairly high.

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And you couple that with the fact that

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gold's been on a bull run.

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You know, I kind of understand why people

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are putting one and one together and thinking

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that's the reason.

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But the real reason why people think that,

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and it's always seems to be people of

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a certain