Predicting the future?

In January 2011 Cazenove Capital technical strategist, Robin Griffiths was reported as saying that not owning gold was “a form of insanity”. The rationale for his statement was based on his evaluation of the prevailing economic conditions, the relative strength of the dollar and the stellar performance of gold over the past 10 years. He went on to say that gold’s 10-year Bull Run would continue and even intensify. Gold, he said, was still not an “over-owned trade”. 

I disagree. Not because I think he’s wrong. He might be right, only time will tell. I too have an opinion about the future direction of gold prices. The reason that I disagree is that this is just his opinion. Although it might be based on his expertise, experience and the vast amount of economic & market data, the simple fact is that he simply doesn’t know what gold will do. There is no crystal ball of investing. We like to think that the professionals with big salaries and bigger bonuses have a skill that enables them to beat the market by predicting the future. They do not. 

The only predictable thing about the markets is that they are unpredictable. Otherwise investment professionals who could accurately predict the future would have made so much money they could retire. Or at least they would be able to use their own rather than other peoples’ money to bet on their hunches. 

Investment decisions should never be made on a hunch. Not Rob Griffiths’, not mine and not anyone else’s for that matter. Whilst I have an opinion on the future movement of gold (and many other things investment and market related) I will never invest my clients’ money based on my opinion. Investments should be made based on sound principles, a detailed assessment of the evidence, and a thorough knowledge of the client’s risk and return profile. Our evidence based investments do this. 

Can anyone accurately predict the future direction of any investment? Gold isn’t even an investment – it’s a speculation but that’s another story.