Why SMSF & Gold Make Sense Right Now

The odds of a US rate hike in December are certainly shortening and opinion is torn on whether this will be good or bad for the UISD gold spot price.  You can read more on that here.  But one thing there is little speculation on is that an increase in rates will almost certainly see an increase in the USD and an increase in the USD will almost certainly see a decrease in the AUD.  This is a simple point but one that is lost on many Australian investors when considering gold and silver.  We’ve explained this at length before (most recently here), but a falling AUD sees your gold and silver increase in value in the only thing that matters to an Australian (or any other country than the US); your local currency.

It’s not just the USD strength that will put downward pressure on the AUD, the front page of today’s AFR is a reminder of what is ahead for Australia.  The OECD has again cut the growth forecast for this year to 2.2% and next year down from 3% (just 5 months ago) to 2.6%.  Whilst that’s not good, try and remember the last time the OECD or IMF etc actually increased a growth forecast since the GFC?  They are continually and consistently revised down as hope loses out to reality.  They are also assuming 3.2% Government spending growth to get to that measly 2.2% this year.  In our new norm of constant deficits that spending is by definition more debt.  They also forecast our unemployment rate will remain at around 6.2% for 2 more years seeing the most sustained period of high unemployment since the 1990’s recession.

This should all be ringing alarm bells for Aussie investors and particularly for their superannuation.  Why the latter in particular?  Well you are essentially ‘forced’ to invest your super, you can’t simply pay off your home loan etc with what spare money you may have.  Most managed super funds are weighted very heavily into Aussie shares and you have little to no say in that.  At these low (and likely lower) interest rates you get essentially no return after tax if you save cash either.  All the while too, the declining AUD is increasing the cost of most goods that zero growth cash can buy.  Those who take control of their super through a Self Managed Super Fund (SMSF) have the opportunity to look at investments like gold and silver that actually benefit from a declining AUD and balance their wealth accordingly.  You can learn more about SMSF here, call us or come and visit to talk through this further.  It’s incredibly simple.