Don’t get me wrong, I understand the main reasons people invest in gold…but for some reason I cannot make sense of it as a long term investment. Will it really still be valuable in 30-40 years? Please feel free to poke fun at my ignorance or even better, take me to school. Thanks.
Gold Precious metal for jewelry and input for some electronic devices. Inflation hedge maintaining the purchasing power of the investor. Protection against dollar devaluation. Demand is coming from 2 spaces; investors seeking inflation protection and vendors selling jewelry or inputs for electronics. I ran a correlation against historical gold prices and CPI and obtained a coefficient of .94 versus .74 with jewelry sales. Therefore I’m lead to believe that gold is simply a trading security for those who fear devaluation of the dollar and high inflation. I own some gold in a commodity fund. The fund pays a dividend and it has performed well in the recently. However this fund is like 7% of my total portfolio. Long term? It should revert to the mean and follow CPI, which is about a 3% increase per year. There are plenty of gold haters out there who pull up this fact time and time again.
http://seekingalpha.com/article/247027-gold-a-bad-investment-and-getting-worse-part-i?source=yahoo The chart on gold demand speaks for itself. I can guarantee that it will fall sharply. Can’t say when, but I’ll enjoy the ride down.
Presume you have shorted gold then? The author in that article doesn’t believe that the Fed’s programme of printing money will lead to price inflation & currency devaluation. Are you so sure…? If you wanted to attach another label to that chart, it could be that people with money are willing to back their opinions - and there are no better indicators for people’s real views than when they have put cold hard cash on them. So they are more sure now than 10 years ago. I wonder what John Paulson thinks…
Yes, I am short gold. Yes, it has been a store of value for thousands of years, and yes, it has many industrial purposes that make it valuable. But the run in prices has been historic and I cannot allow myself to believe it will stay at this level 1, 3, 5, 10 years from now. I am not claiming I know much about precious metals or gold, or even the pyschology of the stock market. Sometimes when you look at something, you have to go with your gut, and that’s what mine’s saying.
RadBikerSouthCO Wrote: ------------------------------------------------------- > Yes, I am short gold. > > Yes, it has been a store of value for thousands of > years, and yes, it has many industrial purposes > that make it valuable. > > But the run in prices has been historic and I > cannot allow myself to believe it will stay at > this level 1, 3, 5, 10 years from now. > > I am not claiming I know much about precious > metals or gold, or even the pyschology of the > stock market. Sometimes when you look at > something, you have to go with your gut, and > that’s what mine’s saying. i dont htink the industrial purposes make it valuable over 90% of all mined gold is still recoverable stock
That’s a little misleading. “Of the estimated 150,000 tons of all gold ever mined, about 15% is thought to have been lost, used in dissipative industrial uses, or otherwise was unrecoverable or unaccounted for.” In other words, “recoverable” doesn’t mean it’s just sitting there waiting to be used. Normally, 5 to 10 percent of world gold output is consumed by industry; the remaining 90 to 95 percent is used for monetary purposes.
Of the estimated 150,000 tons of all gold ever mined, about 15% is thought to have been lost, used in dissapative industrial uses, or otherwise was unrecoverable or unaccounted for. Of the remaining 128,000 tons, central banks hold an estimated 32,000 tons as official stocks, and about 96,000 tons is held privately in coin, bullion, or jewelry." Data as of 2004.
Historically an ounce of gold has been worth about 400 loaves of bread. At the store, I see bread going for $2.50-$3.00 a loaf. That suggests a price of $1000-$1200. Kitco.com says gold is going for $1350, which would imply a price of $3.40. With wheat coming at all time highs, I could imagine a price like that. There may also be a premium on gold, particularly in areas of the world where people might need to be able to take their wealth portably and quickly. Can you think of any places in the world where that might be extra valuable right now?
I don’t think too many people believe gold is a long term investment. Obviously it’s been a great investment for the last 10 years, but stocks have crushed gold over the last 100 years. Doesn’t mean it can’t be a good trade though. Most gold bugs I talk to take possession of the physical metal more as an insurance policy against the day all fiat currencies collapse. Needless to say, most gold bugs aren’t great dinner party guests. Silver, on the other hand, has many more industrial uses (solar panels being a big one) and it’s actually in backwardation at the moment. Something that’s never happened in the history of the silver futures market. Now that’s something to think about…
Sweep the Leg Wrote: ------------------------------------------------------- > I don’t think too many people believe gold is a > long term investment. Obviously it’s been a great > investment for the last 10 years, but stocks have > crushed gold over the last 100 years. Doesn’t > mean it can’t be a good trade though. > > Most gold bugs I talk to take possession of the > physical metal more as an insurance policy against > the day all fiat currencies collapse. Needless to > say, most gold bugs aren’t great dinner party > guests. > > Silver, on the other hand, has many more > industrial uses (solar panels being a big one) and > it’s actually in backwardation at the moment. > Something that’s never happened in the history of > the silver futures market. Now that’s something > to think about… ooo, great tidbit there.