iShares Gold ETF - Update

For some time now I have become increasingly bearish on global equities. Last year I decided to de-risk my portfolio and set out some of my thinking in this article. I have been selling off equities and increasingly moving into cash, government bonds and gold

In the past, I have never been a big fan of holding gold. Obviously it cannot provide an income so that was one reason back when I needed dividend income to bridge the gap after taking early retirement in 2008. But that doesn't mean there is no return...in fact I was surprised to learn that over the past 15 years or so, gold bullion has generated a capital appreciation of 11% p.a. on average.

I think most investors will know that gold is traditionally regarded as a safe haven in times of economic and political uncertainty. It seems uncertainty is becoming the norm - the global pandemic still unwinds, invasion of Ukraine, high inflation and the rising cost of living, global warming and the climate crisis...not surprising therefore that the trust has performed well and is currently at an all-time high. 

In recent weeks we have seen the collapse of Silicon Valley Bank and the serious problems at Credit Suisse following which the price of gold rose to a record high point of £1,634/oz ($2,000). The World Gold Council revealed that central banks had accumulated gold at the fastest pace on record in early 2023 buying a net 125 tonnes. There is speculation that Russia and China are building gold reserves as backing for a new currency to rival the US dollar.

Long Term Gold Price (click to enlarge)

Therefore in times of increasing uncertainty, I believe it would be a mistake to discount the longer term value provided by gold.

I have increased my holding in Personal Assets trust over the past 12 months and that typically holds around 10% in physical gold. However, in late 2021 I decided to add a pure gold ETF to my portfolio - iShares Physical Gold (SGLN) which has been around since April 2011 and with low annual charges of 0.15%. With subsequent top-ups the average price paid was £24.50

Other options could be a fund such as Blackrock Gold & General or LF Ruffer Gold for example but as my platform charges are capped for shares and ETFs with AJ Bell, the iShares option was the better one for me.

So far it has proved to be one of my better investment decisions of recent times. The shares were purchased at an average price of £24.50 and have advanced to currently £31.30 so a handy 28% uplift over the past 18 months. The shares together with the holding of gold in Personal Assets trust now make up around 6% of my total portfolio (ISA and SIPP).

Conclusion

Rightly or wrongly, I increasingly regard the climate situation as the biggest threat to global markets. The unprecedented combination of heatwaves, droughts, storms and melting polar ice sheets suggests that the climate crisis is escalating. The IPCC released its latest report in March giving notice that we are now in the last chance saloon to take decisive action to mitigate the effects of global warming and urging world 'leaders' to actually do what they all know needs to be done. 

Many countries have pledged to reduce emissions at recent COP conferences but few have so far followed through on action. So, I see little sign of any decisive urgency to take meaningful action and think the worsening climate situation could well destabilise global economies.

So, for now I will continue with a more defensive portfolio and to hedge my bets with gold, government bonds and cash.

As ever, this article is merely a record of my personal investment decisions and take on the risk/rewards associated with the current markets. It should not be regarded as an endorsement or recommendation - always DYOR!