Gold is not an investment. It's money. People are going to learn in the future that work is how you make money. Speculating on the markets is not work.
BS
Gold
- Thread starter goodguy1977
- Start date
BS
What was wage like in 1999 and house prices? Cheap way to mine gold with the price of gas and labour today?
I don't think wage has increased much at all from 1999. Housing prices had its own bubble, roughly doubled. gold prices went up 4 to 6 times.
nobody ever guessed natural gas would be so cheap today... Being another limiting resource and all...
Even if supply of gold does not go up, demand side is purely artificial. without China and India hording , price will plummet. The only question is when economy recovers and war threats are gone people will lose interet in gold.
Taking a somewhat longer view, for the 40-year period ending March 31, 2013, gold performed in line with many widely followed fixed income benchmarks, while lagging behind most equity indices. We find it ironic that the return on gold over the past four decades is essentially indistinguishable from five-year US Treasury notes, often scorned by gold advocates as “certificates of confiscation.”
Considering the volatility of gold prices, even a 40-year period is too short to provide conclusive evidence regarding gold’s expected return. And the issue is further clouded by shifts through time in the legality of gold ownership and its changing role in various monetary systems worldwide. In his book The Golden Constant, published in 1977, University of California, Berkeley Professor Roy Jastram examined the behavior of gold in England and America over a 400-year-plus period—and suggested that the long-run real return of gold was close to zero. Even with centuries of data to study, however, he couched his conclusions in cautious language.
Some might argue that gold’s price behavior will never succumb to rational analysis. For those seeking to try, a recently updated paper by Claude Erb and Campbell Harvey offers a useful framework for discussion without necessarily resolving the debate. Along the way, it provides the reader with a few nuggets of historical interest, including a comparison of military pay between US Army captains of today and Roman centurions under Emperor Augustus. (Apparently, little has changed over 2,000 years.)
The authors cite a number of reasons advanced in support of gold ownership, including a hedge against inflation, a safe haven in times of stress, an alternative to assets with low real returns, and its “under-owned” status across investor portfolios. Although the inflation hedge argument is likely the most frequently cited attraction for gold investors, the authors find little evidence that gold has been an effective hedge against unexpected inflation. They go on to poke holes in the assertion that gold qualifies as a genuinely safe haven or presents an appealing alternative in a world characterized by low real yields.
The most interesting argument, they believe, is the claim that gold is under-owned in investor portfolios and that a small shift in investors’ allocation strategy could lead to a significant rise in the real price of gold. Putting aside for a moment the ambiguity of the “under-owned” statement (all the world’s gold is already owned by somebody), the authors suggest it is plausible that individuals or central banks could choose to have greater exposure to gold. If they are insensitive to prices, this choice could cause the real price of gold to rise, particularly if gold producers are unwilling or unable to increase production. (On that note, it’s also conceivable that a significant real price increase would encourage development of electrochemical extraction of the estimated 8 million tons of gold contained in the world’s oceans, dwarfing the existing gold supply.)
The “gold is under-owned” argument has been advanced by a number of thoughtful investors, and only time will tell if such a shift in allocation strategy takes place with the consequences they expect. While acknowledging the bullish implications for gold prices under this scenario, the authors point out that gold prices relative to the current inflation rate are roughly double their long-run average since the inception of gold futures trading in 1975. They suggest $800 per ounce is a suitable target when applying this metric. Which is more plausible—that prices will gravitate closer to their historical average or that a new world order is emerging that calls for a sharply different valuation approach? No one can be sure; hence, the title of their paper, “The Golden Dilemma.”
What should investors make of all this? In our view, long-run investment results for any individual reflect the combination of available capital market returns and the investor’s behavior and temperament. As Warren Buffett has observed, excitement and expenses are the enemy of every investor, and all of us could benefit by examining our inclination to invest with our hearts rather than our heads. The decision to own gold often is motivated by an emotional response to current events, leading to abrupt shifts in asset allocation strategy and a failure to achieve capital market rates of return there for the taking. If adopting a permanent 5% allocation to gold encourages investors to maintain a buy-and-hold strategy for the remaining 95% of their portfolio, perhaps that is the most sensible solution for some. Many other investors undoubtedly will be just as content to stock their portfolios with securities offering interest and dividends—and let gold fulfill their innate human desire for rare and beautiful objects of adornment.
My own opinion - if we ever come to a SHTF scenario, a shotgun, rifle or handgun will be far more valuable than gold.
Considering the volatility of gold prices, even a 40-year period is too short to provide conclusive evidence regarding gold’s expected return. And the issue is further clouded by shifts through time in the legality of gold ownership and its changing role in various monetary systems worldwide. In his book The Golden Constant, published in 1977, University of California, Berkeley Professor Roy Jastram examined the behavior of gold in England and America over a 400-year-plus period—and suggested that the long-run real return of gold was close to zero. Even with centuries of data to study, however, he couched his conclusions in cautious language.
Some might argue that gold’s price behavior will never succumb to rational analysis. For those seeking to try, a recently updated paper by Claude Erb and Campbell Harvey offers a useful framework for discussion without necessarily resolving the debate. Along the way, it provides the reader with a few nuggets of historical interest, including a comparison of military pay between US Army captains of today and Roman centurions under Emperor Augustus. (Apparently, little has changed over 2,000 years.)
The authors cite a number of reasons advanced in support of gold ownership, including a hedge against inflation, a safe haven in times of stress, an alternative to assets with low real returns, and its “under-owned” status across investor portfolios. Although the inflation hedge argument is likely the most frequently cited attraction for gold investors, the authors find little evidence that gold has been an effective hedge against unexpected inflation. They go on to poke holes in the assertion that gold qualifies as a genuinely safe haven or presents an appealing alternative in a world characterized by low real yields.
The most interesting argument, they believe, is the claim that gold is under-owned in investor portfolios and that a small shift in investors’ allocation strategy could lead to a significant rise in the real price of gold. Putting aside for a moment the ambiguity of the “under-owned” statement (all the world’s gold is already owned by somebody), the authors suggest it is plausible that individuals or central banks could choose to have greater exposure to gold. If they are insensitive to prices, this choice could cause the real price of gold to rise, particularly if gold producers are unwilling or unable to increase production. (On that note, it’s also conceivable that a significant real price increase would encourage development of electrochemical extraction of the estimated 8 million tons of gold contained in the world’s oceans, dwarfing the existing gold supply.)
The “gold is under-owned” argument has been advanced by a number of thoughtful investors, and only time will tell if such a shift in allocation strategy takes place with the consequences they expect. While acknowledging the bullish implications for gold prices under this scenario, the authors point out that gold prices relative to the current inflation rate are roughly double their long-run average since the inception of gold futures trading in 1975. They suggest $800 per ounce is a suitable target when applying this metric. Which is more plausible—that prices will gravitate closer to their historical average or that a new world order is emerging that calls for a sharply different valuation approach? No one can be sure; hence, the title of their paper, “The Golden Dilemma.”
What should investors make of all this? In our view, long-run investment results for any individual reflect the combination of available capital market returns and the investor’s behavior and temperament. As Warren Buffett has observed, excitement and expenses are the enemy of every investor, and all of us could benefit by examining our inclination to invest with our hearts rather than our heads. The decision to own gold often is motivated by an emotional response to current events, leading to abrupt shifts in asset allocation strategy and a failure to achieve capital market rates of return there for the taking. If adopting a permanent 5% allocation to gold encourages investors to maintain a buy-and-hold strategy for the remaining 95% of their portfolio, perhaps that is the most sensible solution for some. Many other investors undoubtedly will be just as content to stock their portfolios with securities offering interest and dividends—and let gold fulfill their innate human desire for rare and beautiful objects of adornment.
My own opinion - if we ever come to a SHTF scenario, a shotgun, rifle or handgun will be far more valuable than gold.
Warren buffett's view on gold:
http://www.forbes.com/sites/stevedenning/2012/05/09/why-warren-buffett-wont-invest-in-gold/
For those predicting the dooms day and hoarding physical gold. Think what good is your gold if society is in chaos? as the previous poster says, guns and other life essentials would worth much much more than gold.
http://www.forbes.com/sites/stevedenning/2012/05/09/why-warren-buffett-wont-invest-in-gold/
For those predicting the dooms day and hoarding physical gold. Think what good is your gold if society is in chaos? as the previous poster says, guns and other life essentials would worth much much more than gold.
Society doesn't have to disintegrate for gold to rise by 30 to 100% from its
current level. I own some physical bullion through investments into a few
bullion funds as a safeguard against future erosion of the value of cash by
inflation. Gold is actually not always a good hedge against inflation. In fact
gold prices slided from its top in the early 80s through many years of high
inflation. But that was a time of real economic growth when interest return
of your saving more than offset the impact of inflation. Growth of the U.S.
economy from the last decade was at best anemic. On the surface of it
the prospect of investing into the stock market looks good considerting
S&P 500 is hovering near its all time high. But if you notice that the
index has nearly reached the same peak twice over the last decade when
the monetary base of the USD must have increased by three to four-folded
if not more and that the USD itself has depreciated to only a fraction of its
value against gold price you can't really be so sure that the stock market
is the place to park your money. Looking to the near future I'd still look
to stocks for better return than gold bullions. But you have to be a stock
picker to get handsome return. Investing into the broard market index
won't likely beat gold on a 3 to 5 year horizon in my view.
I agree that guns and ammunition are worth more than gold in
apocalyptic scenarios. But I do not buy gold to prepare
myself to live in the world of Mad Max. Gold is money. It is
the ultimate money not money for daily use. Silver
would be more suited to play the role of money if for whatever
reason fiat currencies became nearly worthless. The one transaction
that used gold as money which I am aware of was when Japan exchanged
gold and some other precious metals with Nazi Germany
certain military secret in WWII. To my understanding gold is
money but it is only a money of last resort. I wish I'd never ever have
to redeem my units of Central Fund of Canada for bullion coins and bars
to buy things.
current level. I own some physical bullion through investments into a few
bullion funds as a safeguard against future erosion of the value of cash by
inflation. Gold is actually not always a good hedge against inflation. In fact
gold prices slided from its top in the early 80s through many years of high
inflation. But that was a time of real economic growth when interest return
of your saving more than offset the impact of inflation. Growth of the U.S.
economy from the last decade was at best anemic. On the surface of it
the prospect of investing into the stock market looks good considerting
S&P 500 is hovering near its all time high. But if you notice that the
index has nearly reached the same peak twice over the last decade when
the monetary base of the USD must have increased by three to four-folded
if not more and that the USD itself has depreciated to only a fraction of its
value against gold price you can't really be so sure that the stock market
is the place to park your money. Looking to the near future I'd still look
to stocks for better return than gold bullions. But you have to be a stock
picker to get handsome return. Investing into the broard market index
won't likely beat gold on a 3 to 5 year horizon in my view.
I agree that guns and ammunition are worth more than gold in
apocalyptic scenarios. But I do not buy gold to prepare
myself to live in the world of Mad Max. Gold is money. It is
the ultimate money not money for daily use. Silver
would be more suited to play the role of money if for whatever
reason fiat currencies became nearly worthless. The one transaction
that used gold as money which I am aware of was when Japan exchanged
gold and some other precious metals with Nazi Germany
certain military secret in WWII. To my understanding gold is
money but it is only a money of last resort. I wish I'd never ever have
to redeem my units of Central Fund of Canada for bullion coins and bars
to buy things.
sensible post even for a gold long. Agreed for the most part but will see how stock vs gold in the next 3 -5 years.
Unless you are short a couple of full size futures contracts, then you get to flip the chart upside down and ring the cash register
Pulled the trigger today(quotes from MarketWatch):
SLW/quotes/nls/slw 22.63 +0.86 +3.95%
GG/quotes/nls/gg 26.78 +0.96 +3.70%
ABX/quotes/nls/abx 19.62 +1.04 +5.60%
Forgot to include SLW in my reply above.
In pre-WW II Europe, the Jews preferred lugging diamonds around instead of the much heavier gold. Many of the Jews who escaped used diamond as a currency.
Diamonds are preferrable to gold and silver for a millionaire refugee who need to
concentrate his wealth in a form of money for the obvious reason that the form of
that money has to be as small in size and weight as possible. But if the refugee is a
government gold would be more appropriate than diamond. After the end of
WWII and before their final defeat by the communist army the nationalist
government of China under Chiang Kai-sek seized virtually all of the gold bullions
they could get their hand on. I don't know if Chiang actually ever used those
gold as money in Taiwan other than as a bait to lure the communist fighter pilots
to defect to. But one thing is certain. Without gold in its central bank
any currency issued by Chiang's regime at a time when geopolitical tension
was running high it would not likely have been of much value for international trading.
It is likely that Germany and other European nations would never have to
use their gold reserve as money. But if any of the members of the Euro monetary
union like Italy and France are going to give up Euro their gold reserve
would be absolutely essential for their own currency to be trusted.
concentrate his wealth in a form of money for the obvious reason that the form of
that money has to be as small in size and weight as possible. But if the refugee is a
government gold would be more appropriate than diamond. After the end of
WWII and before their final defeat by the communist army the nationalist
government of China under Chiang Kai-sek seized virtually all of the gold bullions
they could get their hand on. I don't know if Chiang actually ever used those
gold as money in Taiwan other than as a bait to lure the communist fighter pilots
to defect to. But one thing is certain. Without gold in its central bank
any currency issued by Chiang's regime at a time when geopolitical tension
was running high it would not likely have been of much value for international trading.
It is likely that Germany and other European nations would never have to
use their gold reserve as money. But if any of the members of the Euro monetary
union like Italy and France are going to give up Euro their gold reserve
would be absolutely essential for their own currency to be trusted.
