Seneca's Elston: Why gold is a poor investment and doesn't always hold its value

With the gold price having trended upwards in real terms by just 1.2% since 1920, Peter Elston, chief investment officer of Seneca Investment Managers, asks if the metal is really worthy of its status

What role should gold play in a portfolio? Should it be considered an investment, a store of value (money), or as insurance? The great value investor Jean-Marie Eveillard said, "We don't look at gold as a commodity, but as a form of insurance against what Peter Bernstein calls extreme outcomes. "In most circumstances in which worldwide equity markets would go down – and not just for a week or two – the price of gold would go up, providing a partial offset to the hits we'd take in our equity portfolio". You might think that the gold price is getting close to the MCP. But if seller...