Why Only 20% Exposure for Gold

Why are we only buying 20% into Gold for now and not more?

I’ve been asked this question of late and the reason is this sector has gone up already and may correct. Fig. 1 shows how stocks GLD and ABX have already risen 11% and 56% respectively since we entered this market and a 10% correction would not be unlikely for the sector as Gold it is currently consolidating around $1250/oz.

Therefore we will continue to monitor and adjust the holdings as necessary, with the view that after consolidation there is still upside potential.Using 20% is more conservative, rather than trying to go for the home run at this stage. This situation is similar to our A-Shares position in July 2014 (Started to rise, then went sideways for around 6 months then further rose).

Once again the two funds chosen are BlackRock World Gold Fund and Investec Global Gold Fund. We do not know which one will perform better, thus both are used and later will be amended.

Fig. 1, GLD & ABX Performance Jan – Feb 2016 (Source: Yahoo Finance)

Note: As of March 21, the prices are GLD = $119.80 and ABX = $14.74

Best,
Michael

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Why Only 20% Exposure for Gold

Why Only 20% Exposure for Gold

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