Janet Briaud, president and founder of Briaud Financial Advisors, makes it clear that she is “absolutely not a gold bug,” but she does think that gold is an important part of an overall portfolio.
Ms. Briaud has been investing in gold since 2003, and she advises her clients to have between 5% and 10% allocated to the precious metal because the near-term economic picture is “scary right now.”
InvestmentNews: Gold is down about 11% from the April 2 intraday high of $1,600 an ounce, and it recently saw its biggest one-day drop in more than 30 years. Why has the price of gold become so volatile recently?
Ms. Briaud: There are three or four reasons, and one of them is that the price got increasingly higher. It got up to about $1,900 about 18 months ago and everybody got excited about it.
Also, [The]
Goldman Sachs [Group Inc.] came out and said, “We’re shorting gold,” there have been reports that Cyprus planned to sell some gold reserves, and China’s economy is slowing, which means it could be buying less gold.
InvestmentNews:What happens to the price of gold if countries across Europe start selling their gold reserves to pay down debt?
Ms. Briaud: I honestly don’t know what would happen. I know that China and some of the Arab countries are still buying gold. Certainly, in the short run, it would scare the daylights out of the gold market and make things worse.
InvestmentNews:Arizona and Utah are now allowing gold and silver to be used as legal tender, and more than a dozen other states have legislation under way to pass similar measures. What does this represent?
Ms. Briaud: It reflects a nervousness of what’s happening in U.S. If something like Cyprus happens to us, what do we use as currency to buy groceries? That’s part of the very heightened fear going on right now.
It’s sort of the same notion of having guns and shelter to prepare for the worst. I think it’s scary right now, but it’s not that bad.
InvestmentNews:Should everyone have gold in their portfolio?
Ms. Briaud: I think it makes sense to have some gold at this time, and part of it is because of the currency devaluation going on around the world.
Gold is not something you would necessarily own for the rest of your life, but it makes sense to have some until we get some of these problems resolved.
As long as we have such high debt levels, I think it just makes perfect sense to have some gold.
InvestmentNews:In what scenario, if any, would you recommend not owning gold?
Ms. Briaud: A lot of people probably shouldn’t own gold if they don’t know why they own it. If you’re just buying gold because the price is going up, that doesn’t make sense. If you’re buying it at $1,900 and selling it at $1,300, that doesn’t make sense.
People should buy gold for a reason. You have gold because you think your currency is being devalued. If gold is doing pretty well, it means other things are doing badly.
If you believe this is a difficult economic environment, gold is one of the things that might do well if things are really, really bad. But there are no guarantees. That’s why you don’t have a large part of your portfolio in gold.
