gold as money and investment

Discussion in 'Money Talk$' started by billwald, Aug 8, 2011.

  1. billwald

    billwald
    Expand Collapse
    Banned

    Joined:
    Jun 28, 2000
    Messages:
    11,414
    Likes Received:
    0
    AP wire story today:

    Gold, which investors traditionally buy when they want a safe investment, rose above $1,700 per ounce for the first time Monday. Its price remains below its 1980 record after adjusting for inflation.

    Read more: http://www.seattlepi.com/national/article/U-S-stocks-tumble-1767183.php#ixzz1URwbsYFc

    IN OTHER WORDS, in the LONG run the price of gold only paces inflation. So in the long run, the people who say gold is money are correct but those who say gold is a long term investment are wrong. If the AP story is correct, those who bought in 1980 are still behind the curve.
     
  2. TomVols

    TomVols
    Expand Collapse
    Administrator
    Administrator

    Joined:
    Oct 30, 2000
    Messages:
    11,170
    Likes Received:
    0
    I don't think it even does that. Isn't the APY of Gold around 1.54, while inflation typically is around 2?

    Agreed. Gold may be a good hedge. But at the end of the day, it's just one of a cacophony of metals, commodities, etc., that can be bought, sold, or traded.

    I believe that's correct. I don't have the numbers at my disposal, but the 90s were pretty hard on gold buyers if memory serves me correct. One of my problems with the gold fanatics are that their solution to everything from the economy to cloggy drains is a return to the gold standard. That's a vast oversimplification (and I'm being kind).
     
  3. glfredrick

    glfredrick
    Expand Collapse
    New Member

    Joined:
    Aug 5, 2010
    Messages:
    4,996
    Likes Received:
    0
    Weird thing about gold (and other precious metals and jewels) down through the ages, is that everyone wants them because everyone wants them, but at the end of the day, one cannot "eat" nor "plant" nor "produce" with any precious metal. Additionally, when any sovereign nation becomes strapped for gold, it simply goes out and recovers it from its people (or from another nation by act of war if its own people have none to confiscate).

    We are just about at the place where the confiscation begins.

    At that point, we join the majority of the human race down through history and eating becomes more important than gold.
     
  4. Thousand Hills

    Thousand Hills
    Expand Collapse
    Active Member

    Joined:
    Oct 3, 2010
    Messages:
    1,488
    Likes Received:
    4
    I have a significant amount of my investment portfolio in precious metals, I will cash them in when I get a huge stockpile. I call the pile my 401 C (Aluminum Cans ):laugh:
     
  5. TomVols

    TomVols
    Expand Collapse
    Administrator
    Administrator

    Joined:
    Oct 30, 2000
    Messages:
    11,170
    Likes Received:
    0
    Well put. A few years ago, I went to a town that suffered a weather tragedy. Power was off all over the city for a couple of days during the summer. People weren't clamoring for gold. They didn't need money. They were trading bottles of water for flashlights and candles. What value did gold have? Nothing. My point? If there's a catastrophic event, gold has no value in and of itself, as glfredrick pointed out.
     
  6. Havensdad

    Havensdad
    Expand Collapse
    New Member

    Joined:
    Jun 14, 2007
    Messages:
    3,382
    Likes Received:
    0
    Yeah, that is completely wrong. If someone would have bought Gold in the early 80's, at 650 dollars an ounce, they would have earned the equivalent of 3.5 percent annual yield; well above inflation, and WAY above your average CD rates.

    However, if a person would have bought it at the average price, they would have gotten around a 6 percent annual yield: a VERY nice return on your investment.
     
  7. glfredrick

    glfredrick
    Expand Collapse
    New Member

    Joined:
    Aug 5, 2010
    Messages:
    4,996
    Likes Received:
    0
    IF one had purchased it when it was that price, you would be right.

    But why are people purchasing it when it is at an all time high?
     
  8. TomVols

    TomVols
    Expand Collapse
    Administrator
    Administrator

    Joined:
    Oct 30, 2000
    Messages:
    11,170
    Likes Received:
    0
    CD median APY since 1980 = 7.74%, more than gold.

    Then again, the comparison is not sound financially, since Gold is a hedge against inflation, and CDs often are not good devices vs inflation. But that makes the point even further, doesn't it?

    S&P Annualized ROI for same time? = around 12 percent. So your basic run of the mill Index fund would double or triple Gold's ROI.

    Again, gold is not a bad hedge, but it's not the investment the late-night hucksters and bloggers make it out to be. I just read analyses of gold and metal funds that are underperforming in this economy.
     
  9. Havensdad

    Havensdad
    Expand Collapse
    New Member

    Joined:
    Jun 14, 2007
    Messages:
    3,382
    Likes Received:
    0
    Because the dollar is about to crash. When the dollar crashes, savings accounts become worthless, and the stock market follows suit. The only safe havens are things like gold and foreign currency.
     
  10. TomVols

    TomVols
    Expand Collapse
    Administrator
    Administrator

    Joined:
    Oct 30, 2000
    Messages:
    11,170
    Likes Received:
    0
    If the dollar crashes, FOREX is not someplace I wanna be. So much debt is tied to us. Besides, this is all being disproven. Look at how people are flocking to Treasuries as safe-haven investments. People were selling gold a week and a half ago and gobbling up Treasuries.
     
  11. billwald

    billwald
    Expand Collapse
    Banned

    Joined:
    Jun 28, 2000
    Messages:
    11,414
    Likes Received:
    0
    Don't forget that most people pay a 20% premium when buying?

    If cash money is becoming worthless then else why do the gold sellers prefer my cash to their gold?
     
  12. InTheLight

    InTheLight
    Expand Collapse
    Well-Known Member

    Joined:
    Dec 17, 2010
    Messages:
    16,189
    Likes Received:
    611
    Because doomsday rhetoric is at an all-time high.

    Because gold investment firms are running radio commercials on right-wing talk radio stations day and night trying to find new investors to buy gold. They are quite Ponzi-like in their operations.

    Because buying when the market is peaking and selling when it is bottoming out is human nature.

    Never understood the allure of gold. It's dug out of a hole in the ground, melted down into bars and put back into a hole in the ground surrounded by guards. That's pretty inefficient and unproductive.
     
  13. TomVols

    TomVols
    Expand Collapse
    Administrator
    Administrator

    Joined:
    Oct 30, 2000
    Messages:
    11,170
    Likes Received:
    0
    I'd add this:

    Because the naive - who cannot even answer simple economic or accounting questions or even understand the concept of compound interest for pete's sake- are suddenly Milton Friedman when it comes to waxing eloquent on the virtues of gold.

    Of course, the all time low was once an all time high. People forget that, when the market loses 400 points, someone bought the stock everyone panicked and sold. But be that as it may, it doesn't change what InTheLight keenly observed. Well said.
     

Share This Page

Loading...