I'm not usually one to change my investment strategies based on political decisions. However, the golden-haired man's recent ramblings lead me to believe that his choices will not only have cyclical repercussions, but could also have structural consequences.
The simultaneous decline in the value of the dollar, stocks, and US Treasuries seems to reveal a growing aversion among investors toward US assets. There is no denying that a transitory element can explain this situation. We are not yet at a point where the dollar has lost its reserve currency status. However, this phenomenon is unusual enough to encourage a step back from the United States. Ideologically, it also seems consistent.
So I made the decision to adjust the Determinant portfolio by gradually and moderately reducing the proportion of US assets. This approach will result in a slight increase in the allocation to equities from developed countries, excluding the United States. In addition, the role of gold, already integrated into the portfolio, will be somewhat reinforced through the Trading Auto Signal.
The yellow metal is an ally in times of uncertainty, such as the current one. It can, at least in part, serve as a safe haven substitute for the dollar and US Treasury bonds. Moreover, it is of significant importance in the long term, particularly in the event of a prolonged depreciation of the dollar.
Faced with these uncertainties and growing aversion to US assets, a proactive and thoughtful approach is required. Diversification, as always, is essential for navigating these troubled waters. By increasing exposure to assets outside the United States and relying on safe havens like gold, we can better prepare for potential economic turbulence ahead.
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In this case, isn't it a problem that gold is quoted in USD?
Gold has intrinsic value. Its price in dollars fluctuates not only based on supply and demand for the yellow metal, but also on changes in the currency in which it is traded. A weakening dollar therefore tends to make gold more expensive (in $ terms), and vice versa.
It is possible to hedge against currency risk, for example with an ETF like AUCHAH (in CHF on the Swiss stock exchange). But the additional costs incurred negate the entire benefit of the hedge. This is especially true since, as I said, gold has intrinsic value, regardless of the currency.
Thus, since 2010, gold has gained more than 150% in dollar terms, the dollar has lost almost 20% against the CHF and AUCHAH has gained “only” 90%.
If gold has intrinsic value, when its value increases shouldn't it increase in ALL currencies?
Can we find gold quoted directly in CHF and not by converting its USD value into CHF?
Generally, yes, it should increase in all currencies, unless the currency in question appreciates relative to others. In this case, gold could appear to stagnate in that currency, or even decline. Similarly, if that currency devalues, it could appear that gold is rising in that currency, while relative to other currencies, the price of gold would remain stable or even decline.
This is why we say that gold has intrinsic value. It follows its own path, regardless of monetary policies. J.-M. Eveillard, a French investor of international caliber, considers gold to be a currency, and I find this image quite telling. But compared to fiat currencies, it has a huge advantage: it does not depreciate over the long term.
Since gold is traded globally and the dollar is the reference currency in global trading, the price per ounce is most often displayed in USD. Therefore, gold ETFs are, to my knowledge, quoted in USD, except when they are hedged into another currency, like AUCHAH, which I mentioned in my last post. AUCHAH is therefore traded in CHF. But as I have already pointed out, the price to pay for this hedge is not worth it, since it significantly affects the results. Moreover, since gold is already a hedge against the dollar, this does not really bring any added value, quite the contrary.