The gold FOMO trade is too late

WHEN I can’t listen to a podcast without someone trying to sell me gold, when money managers tell me clients are jonesing for the shiny metal, and when friends call to ask what I think about buying it, I know without looking at a single chart that the price of gold has gone vertical and that FOMO has set in.

- Nir Kaissar

And wouldn’t you know, the price of gold has skyrocketed this year, in one of the biggest rallies since its price began to float freely in 1968. Predictably, Google searches for “how to buy gold” are at a record high. Net flows to US-based gold mutual funds and exchange-traded funds have topped $35 billion this year through September, according to Morningstar, Inc., the largest nine-month haul since at least 2005.

Which begs the question: Should investors own gold? I have no doubt that Wall Street, which never misses an opportunity to peddle a hot asset, suddenly thinks so. Morgan Stanley’s Mike Wilson has suggested that investors in a traditional 60/40 stock/bond portfolio move half the bond allocation to gold, rejiggering their portfolio into 60/20/20 stock/bond/gold.

At first glance, this looks like an upgrade. The gold-infused portfolio would have beaten a 60/40 comprised of the S&P 500 Index and a basket of US government and corporate bonds by 0.7 percentage points a year from April 1968 through September, including dividends.