Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
An Emerging Gold Explorer with Two Highly Prospective Land Packages in New Zealand’s historical gold fields.
For investors, the safer and more rewarding way is to buy asset with scarcity, such as beachfront properties, mint-condition rare coins, and limited-production luxury automobiles. This is one of the fundamental reasons why the precious metal has maintained its purchasing power over the centuries, in good times and bad.
However, there are some big name investors who do not believe in investing in gold, including Warren Buffett. Buffett has pointed out that gold does not generate income and has no practical use, which makes it less attractive as an investment option than assets that can generate income.
Twenty years ago, a financial writer by the name of James Surowiecki stated that just because gold has a long history of being used as a currency doesn’t mean it has a future. In his opinion, the reasons for buying gold are long gone, leaving only the urge for investors to want to buy gold from time to time.
If this is the case, then the dollar, which contains no measurable quantities of any of the elements on the periodic table and nothing that contributes to industrial applications, appears to have even less intrinsic value.
In fact, gold is becoming increasingly scarce compared to paper assets such as Treasuries. In 1979, when the U.S. federal debt first crossed the $1 trillion mark, the current market value of gold reserves was about $150 billion. In other words, the total debt was seven times larger than the gold reserves. And to this day, the $34.7 trillion U.S. federal debt is 52 times the value of gold reserves.
Interestingly, the value of gold, which is considered by some investment experts to be non-yielding, has soared by more than 400% over the past 20 years. In contrast, long-term Treasuries, as represented by the iShares 20+Year Treasury Bond ETF (TLT), have risen just 93% over the same period. In other words, gold outperformed dollar-denominated Treasuries by a factor of four.
Over the past few years, a 5% allocation to gold in a portfolio was generally considered adequate. Nowadays, as the global economic and geopolitical landscape changed, analysts pointed out that if the risk-to-reward ratio is the risk objective, 12% gold is the best allocation for the whole portfolio; if the maximum retracement is the objective, 8% allocation ratio can reduce the maximum retracement of the portfolio to a more appropriate state. Taken together, 10-15 per cent is a more appropriate level.
