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Thu 15 Aug 2019 02:32 PM

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Opinion: Dabbling with the Midas touch

Trump's aggressive attitude, Brexit and the Iranian showdown has seen a resurgence in gold's reputation as a safe haven, which is great if you're a smart long-term investor looking to sell when prices are at record levels

Opinion: Dabbling with the Midas touch
Shining bright: Gold is poised to perform incredibly well in this low-interest rate environment, according to an expert

There is a line in this week’s magazine that made me choke on my coffee: “Gold had a 200 percent year-on-year increase, while on Wednesday, Gold futures rallied above $1,500 an ounce, the highest level since 2013,” our reporter Gavin Gibbon wrote in his feature with Les Male, the CEO of the Dubai Gold and Commodities Exchange (DGCX).

While it’s great that the DGCX has had the best ever month in its 14-year history, I’m kicking myself that I took my eye off the rally in gold.

A few years ago, I decided to try out the old adage ‘you need money to make money’. Dubai property seemed a bit too risky and I wanted to be able to pull my cash out at short notice if I needed it urgently. The usual routes for instant financial gratification were the equity markets or trying my chances in Las Vegas. I decided it was time to dabble in the precious metal and see if I had the Midas touch.

It was all very easy. I opened a gold account with a local bank and bought a bag of digital gold. I sat back and, luckily, the price of gold was on the way up. Trump was stirring up geopolitical tensions across the globe and gold was seen as the universal safe haven so investors were flocking to the shiny metal.

I was soon addicted. Each morning I would hurriedly log into my computer and see how much the gold price had gone up and then check my bank account to see how much I’d earned. While everyone was hoping for the dollar to strengthen, I was hoping the US economy would tank so the dollar would weaken and my gold bank balance would surge.

Korean showdown

I went to bed one night and headlines were screaming that Trump was squaring up against North Korea. By the time I was at work the next day, the threat of World War III seemed like it was looming, investors were running for safe havens and my gold savings were given a jolt. Hopefully, Kim Jong-un will threaten another missile, Trump with issue an aggressive Tweet and I’ll be loading up my coffers, I thought. Eventually, I decided it was time to pull out. I’d made an easy profit of about AED7,000 in a few weeks and I was very happy I'd made a nice return.

A few months later, I was missing the daily adrenalin buzz and the impact global headlines had on my bank balance. I bought more gold. Big mistake! I’d completely forgotten the most crucial rule of dabbling in the financial markets – buy low and sell high. I was lucky the first time, not so much the second try.

My wife always told me that you should invest in gold for the long-term and weather the highs and lows for about five years, because it will come out positive overall in the end

No sooner had I put AED100,000 into gold and overnight the markets were tumbling. This wasn’t how it went before, this wasn’t supposed to happen. But, things had changed: The US economy was going well, the dollar was back in force, American job numbers were good and the Trump/China trade war was only beginning and it didn’t seem to have the same fear factor of a North Korean standoff.

Each day, I got increasingly more anxious as my gold account continued to shrink. Gold no longer seemed to be the safe haven it once was. In the end, when I got to AED7,500 in losses in a short time, I pulled the plug. I’d had my bit of fun. It was back to earning boring, but steady, interest from the bank.

So, reading this week’s feature, I can’t help kicking myself that if I’d been braver and weathered the losses a bit longer, my gold account today would be shining brightly. But it’s too late now, the time to buy is when the price is low, not at record highs.

Bank buying spree

So why is gold doing so well now? According to Lukman Otunuga, senior analyst at FXTM, the six-year high the precious metal hit last week was due to the fact that three central banks cut interest rates in the face of slowing global growth and persistent trade tensions.

“Unfavourable global macroeconomic conditions, US-China trade disputes and Brexit drama among many other geopolitical risk factors have accelerated the flight to safety. With central bank across the world joining the global monetary easing train, zero-yielding gold is poised to perform incredibly well in this low-interest rate environment. The precious metal remains technically and fundamentally bullish and this continues to be reflected in price action,” he told me.

That isn’t much good to me. My wife always told me that you should invest in gold for the long-term and weather the highs and lows for about five years, because it will come out positive overall in the end. She's right, of course, just don’t tell her I said that.

Shane McGinley, Editorial Director

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