Quantifying

With kind permission from The British Museum This post is a continuation of an earlier post on the 23rd January in which I compared gold bullion with equities (Nasdaq Composite) as an investment. The results there showed that the statistics of the gold price were, surprisingly, very similar to those for the Nasdaq Composite. But the gold price has an almost zero correlation with equity prices. In this post I'm going to show that this makes gold a very valuable holding alongside equities in a diversified portfolio. As the picture above indicates gold has been used as a currency and store of value for millennia. Rome issued gold coins with art work that wouldn't be too out of place in mints today such as the  Royal Canadian Mint  which still issues coins for investment purposes. Modern finance has made it easier to invest in gold though, using instruments such as Exchange Traded Funds (ETF) which track the bullion price. ETFs are issued by major investment managers s...

Source: Network Rail Prophecy would be a wonderful thing - and I'm not talking about the biblical kind - just economic prophecy will do. Financial traders eagerly await numbers such as the  US Non-farm payroll  which has the power to move major markets or the  Purchasing Managers Index  which in the link is nicely mapped globally by Bloomberg. In a post last month I looked at yield curve inversions as an indicator of changes in real GDP and therefore of recessions. The conclusion was that they are indeed a statistically significant indicator of real GDP but only weakly so. A better indicator is simply the change in real GDP from the previous month. Using some statistical jargon GDP is autocorrelated. But what about other indicators of future economic growth (or decline)? There are a plethora of them. A good one might enable you to detect tipping points when an economy starts to move into recession.  In this post I'm going to examine a closely watched ...