Hey guys anyone considering investing in gold. Too low of a price Worthwile investment you reckon?
Hmm, thought about it once and decided no.
Currencies aren’t real, one day we think we have a lot of USD or RMB, and the next maybe they ain’t worth s**t. So one would think maybe a physical asset would be worth something, but again with gold it’s really arbitrary. Maybe tomorrow we don’t think of it as being so valuable. It seems “low” but who is to say where a fair price resides going forward. Plus gold prices, like currencies, seem so mysterious and subject to manipulation.
For something real I like land. I’ll do oil if I can get it near $30.
If Gold doesn’t move after the open we’ve had today - then I’m not interested in it.
As for purelapha’s point about land - it’s a good one. I think in China’s inventory of built property’s been declining steadily - so yeah, could be nice. SE looks good too. India is terrible for land atm - I just heard Rajan say they’ve got 4 years worth of inventory to shift and a tonne of non-performing infra loans
If you posted more like this and less troll bait I’d really enjoy your input not that it matters.
A short question that requires a long answer…
Why do you want to own gold? How are you planning on accessing the market (GLD, miners, buying the physical)? How long do you plan on holding it?
If we’re talking about holding on to it for a long time, yes, I think this is a good entry point. If you’re looking to turn a quick buck, no, I’d hold off. I think there’s a decent chance gold sinks to $800 before rallying back up to the $1325 range. If you’re willing to suffer some short-term volatility, go ahead and buy now. If this is more of a “trade” I’d sit out for now.
Of course, sometimes you encounter deflation, and currencies are great because you can buy more and more things with it. It’s one reason it’s good to have cash lying around during and just after a massive stock crash, whenever that might be.
I’m not sure why gold seems to trump all other commodities. If you’re worried about inflation or trying to hedge when the Dow goes south, why not invest in a basket of commidities? Something like GSG, GCC, or DBC?
I have no position in any of the funds above.
Because gold is treated more like a currency than a commodity. Sure, it technically is a commodity, but when the talking heads discuss commodities, they never mean gold.
Right. People run to gold if they don’t trust currencies. If they think that currencies are going to be devalued or inflated, then they’ll grab gold if they can, because gold can’t be “printed” (though it can be banned, which has been tried). That scenario tends to result in gold being valued higher in currency terms than it was before.
But in a deflationary situation, gold goes down just like everything else.
Presumably the reason people might want gold now (as opposed to a month ago) is that they assume that the market crash will lead to more QE, which they assume will inflate currencies because it is “printing money,” and therefore they run to gold. However, QE has not successfully generated inflation in any place it’s been tried in the post-2008 world, though it may have arguably slowed or stopped deflation.
So it doesn’t seem like gold is a great thing for now, unless you are 1) willing to hold it for a while and 2) that while is long enough for QE not only to stem deflation, but to cause absurdly high levels of inflation. So far, it’s awfully early for that risk/reward ratio to look very appealing, especially given that no QE-implementing zone has managed to create substantial levels of inflation.
So what the heck is a great buy if we enter a deflationary cycle? I’m brainstorming without great options here and don’t feel like buying treasuries.
Fixed income is generally the best bet during deflation, or just cash in mattresses. However, if deflation means that default rates shoot through the roof (they will tend to go up, but they don’t always shoot through the roof), then anything with default risk may need to get repriced.
The challenge with deflation is that people sell things because there is no income coming in to buy stuff. This makes things cheaper, but also results in downsizing, which results in fewer people able to pay, whicih pushes prices down again. Eventually, things have to find a bottom, but it can take a looooong time. In the 1880s, it took nearly two decades, in the 1930s, it took the better part of a decade plus a war. The QE experiment after 2008 was an attempt to make bottom-finding something that took less than a decade.
Also, I’d like to point out that we actually don’t know what gold will do during deflation. The last time we had any sort of real deflation was 80 years ago and gold was pegged to ~$21/oz.
At this point, gold is going to be driven by what India, China, and retail investors do (in that order). I don’t think any of them really care that much about USD deflation so I’m unconvinced gold will suffer should we enter into a deflationary period.
As Peter Schiff has been saying, gold prices have been suppressed by the expectation that the Fed can raise rates. When the market realizes this is impossible, gold will soar. Just look at the strength in the junior gold miners $GDXJ today
I guess it’s true that we won’t really know what gold will do during deflation, but the fact that it tends to rise during inflation suggests that either it goes down during deflation (unless the currency is tied to it via a gold standard guaranteed exchange rate), or gold is near-free inflation insurance. The former sounds more likely than the latter.
smhsmichael has an interesting point about how a realization that interest rates are hard to raise might make gold prices rise out of fear of inflation run wild, though I would think that would have to wait until inflation > 2% kicks in. With oil down and now stocks down, this doesn’t look like it’s happening soon, but of course things can eventually turn change.
Also, this It doesn’t seem to me to be something that will make gold “soar,” but I can see it nudging the price upwards, unless QE gets to the point where people start seeing $100 bills mailed to them directly from the Fed, in which case it might soar.
I don’t get smhsmichael’s observation about junior gold miners, though. Why would this indicate that Schiff’s view is the right one, and why would only the junior gold miners be affected, and not the entire sector.
I love gold (and silver) but I try to remain unbiased. That said, Peter Schiff is a dangerous person to listen to. It’s not that he’s wrong (although his recent track record isn’t great) but even when he’s right the magnitude of his calls are way off. I’d recommend taking him with a grain of salt.
Not sure what you’re talking about with respect to the jr miners either.
how are the Jr miners rallying? gold prices have not rallied, their debt situations are not good with reduced ouputs and high debt levels. what are the Juniors rallying on?
I usually agree with the common sense approach, but gold is driven by people that tend to have a screw loose (myself included). I think gold may hold up well even in a deflationary environment because deflation still helps gold bugs prove their point that fiat is meaningless and the Fed can’t control it.
More than deflation, I think steady 2% inflation and low expectations of a change either way would be the worst case for gold.
gold will rally when Doomsday Preppers gets another season.
The only way gold will go up in a deflationary environment is if the central bank is expected to lower target interest rates/inject liquidity into the market.
Looking at how much the CBs are injecting liquidity, I think gold would be a good investment in a deflationary environment…
Granted, equities are great investments in that situation as well.