Investors tempted to buy gold shouldn't expect glittery gains

Gold is not as safe an investment at this juncture as it might seem

- NIR KAISSAR

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.

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

This 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, rejigging their portfolio into a 60:20:20 ratio for stocks: bonds: 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.