In its latest “Investor’s Guide” (only in print) UBS pushes heavily the case for gold. In an interview Dirk Faltin, head thematic research at UBS, says:
“Compared to stocks or oil gold is according to our calculations somewhat cheap, at least not extremely expensive… Gold has maintained its value for over 750 years. Naturally the gold price fluctuates, even substantially… But gold offers some protection against inflation.”
As opposed to UBS we have no particular opinion on the future price of gold. But what we know is that, in real terms, gold has had almost no positive return for investors.
Average Annual Return of Gold (after inflation)
Compared to other asset classes the picture for gold is bleak (source: J. Siegel):
Even short-term government bonds would have returned more than gold. What sense does it make to recommend gold as its price hase been increasing so much over the last few years? This has probably more to do with all those gold etfs, gold certificates and other structured gold products UBS and many other wealth managers want to push down their clients’ throats than with a sensible investment strategy. Please read also the excellent interview with Rick Bookstaber on The Gold Bubble.