Whilst suitable for some investors, self-managed super funds (SMSFs) are certainly not for everyone. Many a person (or couple) have lost a huge chunk of their retirement savings in just a few short years trying to manage it themselves via an SMSF. Some have lost everything by taking too much risk in chasing returns, like leveraging into property or other investments at the wrong time.
Whilst on the subject of investing in gold and its attribute of acting as an inflation hedge, it is important to put some perspective around this. Direct investment in gold may not protect wealth as much as people think over the next couple of years.
The last time gold prices ran up to a peak of US$1,900 an ounce was back in 2011-2012, after the Fed's aggressive quantitative easing and interest rate cuts post the 2008 credit crisis. Speculation amongst gold bugs was rife at the time that the gold price would continue on higher to reach US$5,000 or even $10,000 an ounce. But when the Fed announced QE tapering in 2013, the US dollar which had previously been deflated heavily (some will recall it was at parity with the Aussie dollar in 2012), then started to rebound heavily. The gold price subsided, falling from its peak of $1,900 to less than $1,100 an ounce by 2015.
The gold price only really started a sustained upswing again with the commencement of the US rate cutting cycle in early 2019 which saw more aggressive rate cutting and bond buying from March 2020 with the advent of the Covid crisis. This monetary policy action had the effect of deflating the US dollar, and causing price inflation. During this time, the gold price had a strong upswing, so as consumer prices were inflating, gold was indeed a good hedge for inflation. However, you'll note on the gold price chart, that once US interest rates hit virtually zero in late 2020, the gold price pretty much peaked at over $US2,000 and has been trading in a largely sideways-to-downward pattern since, currently trading at just above US$1800.
Now that US inflation has reached almost 8%, the Fed proposes to counter it by stopping the bond buying in March this year, and raising interest rates. It's not known yet how quickly inflation will come back down, but it's likely it will take at least 6-8 rate rises, which will prove stimulatory for the US dollar, and likely deflationary for the price of gold. This has prompted many analysts to predict the gold price will be $1,600-1,700 an ounce or lower by late 2023. Food for thought...
