The Playground Indicator

Gold fever seems to be everywhere at the moment. My grandson asked me the other day, “Do you own any gold, Pops?”

I said no and asked why he was curious. Apparently, even ten-year-olds know that gold is having quite a run. Pushing through the $5,000 mark had captured his imagination.

There’s something amusing about being financially questioned by a ten-year-old who only recently discovered the tooth fairy isn’t real. I’ve been investing for decades, and I’m getting the third degree from a kid whose worldly wealth consists entirely of football cards and a bag of loose change.

“So you don’t have any?” he pressed, with a disappointed tone. “Afraid not,” I admitted. He shook his head with the wisdom of someone who’s watched three YouTube videos on the subject. “You should probably get some, Pops. Everyone’s talking about it.” Everyone, meaning him, his buddy, and presumably their classmates who watched the same three videos.

I know the usual advice is probably true: gold has historically moved differently from stocks and bonds and all that stuff. I also realise many investors hold a modest amount through a low-cost ETF, treating it as a bit of fun.

But I don’t own any. Not because I think it’s foolish, but because I’ve never gotten around to it. My portfolio does fine as it is. The only gold I possess is a wedding ring. Could I be better diversified with some gold exposure? Goodness knows. But do I care? Not enough to have done anything about it over the last forty years.

To my mind, gold doesn’t pay dividends or interest. It doesn’t grow earnings. Its only return comes from price appreciation, which depends on some eejit being willing to pay more for it later. I just like stocks and bonds, which generate actual cash flows; I’m a bit boring that way.

The fact that precious metals speculation has now trickled down to the playground might mean it’s entering the “everyone knows” phase of the rally. That old investment story about the shoeshine boy might have a grain of truth. I can’t help but wonder: if a ten-year-old is asking about gold, is this the time when the rest of us should be more cautious?

As you might suspect, I’m not taking investment advice from a ten-year-old…yet. But my grandson’s question does ring of that old truism: when an investment starts popping up in normal conversation, it’s maybe not a good time to buy.

Now, I could delve into dollar depreciation, central banks buying gold because of global uncertainty, US policy direction, and general market unease with world events. But I think I’ll stick to playground gossip on this one.

As for my grandson, I suggested he stick with his football cards for now. But it has to be said, if I owned some of the damned yellow shiny stuff, he really would think I’m cool… maybe I should melt down some of that old jewellery in the back of the safe.