"Gold" is the hottest investment asset this year, with significant price increases driven by the weakening of the dollar. It's particularly noteworthy that Warren Buffett's Berkshire Hathaway Inc. has purchased shares in a major gold mining company.

The investment asset that is the "hottest" this year is undoubtedly "gold." Since the beginning of the year until now (August 16), the price of gold has risen by over 28.1%. If we consider the period when gold prices reached a new all-time high of $2,070 per ounce on August 6, 2020, the return on gold during that time soared to 36% from the start of the year. In Thailand, gold prices have also seen a significant increase of over 35% since the beginning of the year, and when gold (bars) hit a new peak of 30,300 baht per baht of gold on August 7, 2020, the return during that period was as high as 41.2%. Thus, gold has proven to be the "best" performing asset, excluding digital assets like Bitcoin.

The primary reason for the sharp increase in global gold prices, which has also affected gold prices in Thailand, is the "weakening" of the "dollar." ... It is well-known that "gold" and the "dollar" often move in opposite directions. Recently, the U.S. Federal Reserve has injected unlimited amounts of money into the economy through "quantitative easing" measures, increasing the money supply and putting pressure on the dollar to weaken. A portion of this increased dollar supply has been invested in various assets, including "gold."

Additionally, in technical terms, gold has recently shown a correlation with "real yields". Real yield refers to the interest rate adjusted for inflation. In simpler terms, if we deposit money in a bank or buy government bonds, the interest earned minus inflation represents the real return. Most international investors use the yield on 10-year U.S. government bonds as a benchmark for gold price movements.

Recently, it has been observed that when U.S. bond yields decrease, gold prices tend to rise, and when U.S. bond yields increase, gold prices tend to fall. The "dollar" is largely involved in all of this. An interesting point from the past weekend is that Warren Buffett's Berkshire Hathaway Inc., beloved by "value investors" worldwide, recently reported purchasing shares in Barrick Gold Corp from Canada for over $563 million. This company is the largest gold mining firm in the world, despite Buffett's previous dismissal of the "value" of "gold."

Buffett's loyal fans know that he has never seen the benefits of investing in gold, as he believes that "gold" cannot "pay dividends" and is not particularly useful. The fact that Buffett is willing to invest over $563 million in shares of the world's largest gold mining company may indicate that he sees potential for gold prices to rise in the future or believes that the "dollar" is depreciating... However, anyone considering a significant investment in gold during this price correction should be cautious, as gold prices are currently more volatile than stocks, and investors must be prepared to accept a considerable level of risk!

SOURCE: www.bangkokbiznews.com