Investors are still worried about the debt problems in European countries like Greece, and that is keeping demand relatively high. But will it hold its value long term or is what we are seeing a speculative bubble on the brink of bursting? The gold price is already down 10 per cent on the highs of last year at US$1725.
The problem with any bubble is timing. If you can buy early and get out in time, you will be smiling. But it's not that easy. If you are selling, chances are many others are too, and the price may fall rapidly.
The KiwiSaver scheme is designed for long-term savings. Fund managers are required to manage investors' money prudently and to reduce risk by diversification. Investing in any one asset class - whether it were gold or oil, or Chinese gooseberries - would not be prudent. However, there could be a proportion of gold in some KiwiSaver schemes.
I asked David van Schaardenburg, principal at NZ Funds Management in Auckland, whether he would include gold in a KiwiSaver fund. He said: "Gold exposures in a portfolio in certain periods can act as a great diversifier away from mainstream investments like shares and bonds. It also has inflation-protection characteristics." Investors can access gold in four ways:
1. Gold miners or explorers - the shares of which are listed on recognised stocks exchanges
2. Gold futures
3. Gold bullion - the physical product
4. Gold fund - typically an actively managed fund which invests in one or more of the above gold investment groups.
"Like any investment, gold has periods when it is good value and conversely when it is overpriced," he said. "Its price can also vary significantly over short time periods. Prudent person guidelines indicate any gold allocation in a KiwiSaver portfolio would only be a modest part of a well diversified portfolio."
When investing in KiwiSaver you need to select a scheme and fund mix that fits your age, your timeframe and your risk profile. Your question suggests you might fall at either end of the risk spectrum so do complete a risk profile before making any decisions.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.
