When the Covid-19 pandemic struck, most FTSE 100 shares crashed. Investors piled out of shares, and into gold. Bullion bounced, and the price of an ounce had soared to over $2,000 by August.
That’s not surprising. Traditionally, investors move out of stocks and into things like gold when shares get a bit rocky. Folks tend to see shares as something to make profits from, with gold held as a means of wealth preservation. People move into cash for the same reason, even in times when interest rates are tiny. Earning no interest from a savings account is still better than losing money on the stock market, right?
Gold was already slipping, and the events of the past week or so have accelerated the trend. Firstly, world stock markets reacted positively to the news that Joe Biden has won the US Presidential election. The FTSE 100 was among them, climbing to its highest level for months. The early pandemic rebound had started to unravel in June, but the market has spiked back up.
Gold prices falling
That’s clearly involved selling gold, which fell sharply last week and now stands around the $1,800 level. Would I start moving from gold back into stocks now?
Well, when I look back over the FTSE 100 this year, and at how the great asset shift developed, I feel sad. Since March, we’ve had what I reckon is one of the best stock buying opportunities in decades. The share prices of some very solid companies fell to silly low levels. These are companies with great futures, held back briefly from their long-term progress.
A year or two, or however long the immediate economic effect of the pandemic lasts, might seem like a big chunk taken out of our lives. But over the decades-long profitable lifetimes of our top companies, it’s little more than a blink.
Investors are always looking out for the next opportunity to come along and make them rich. Many are waiting for the next great growth boom. And stocks like Boohoo and Ocado get people excited when they’re soaring. But offer people plain old good companies at super-cheap knock-down prices during a stock market crash, and many will run away and stick their cash in gold instead.
Wasted opportunity?
So yes, if I’d put my money in gold this year, I’d feel I’d wasted a tremendous opportunity. I didn’t do that, and I’ve stuck 100% to FTSE 100 shares. But what would I do now if I did own the metal?
You’ve probably guessed. Yes, I’d sell the shiny stuff and buy shares. The cheapest of the year’s bargain FTSE 100 buys may well be past us. They might not, mind, and we can’t rule out a further dip. But we’d never get anywhere with constant fear. Yet even if we really are well past the bottom, that doesn’t mean shares are now too expensive.
Quite the contrary, I say. I still believe I’m seeing some of the best stock buys we’ve had in a long time. And I’m also still convinced that there’s no need for gold in a long-term investor’s portfolio.