Investing in Gold

[ringledman]

"Gold gets dug out of the ground. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

-- Warren Buffett

Utmost respect for Buffett, a true value investor of my heart. A guy who rode the American dream economy of the 50s to 00s.

Did you read the article by his long time partner Charlie Munger last week on the death of America?

[broken link removed]
Charlie Munger (pictured with Buffet), Warren Buffett's longtime business partner in Berkshire Hathaway, warns in a new column that the U.S. economic empire is crumbling before our eyes, thanks to federal debt and poor planning.

We certainly are living in interesting times.

And Buffett is correct as a guy who thinks in decades or multiple decades, gold's long term investment potential is zero. In fact it produces a negative return over many decades or centuries due to its storage costs.

Nonetheless, in times of;

Government corruption,
Mismanagement,
Bloated states,
Money printing of the highest order,
Asset price collapses,
Socialist run enterprises,
Propped up too big to fail institutions,
Huge welfare states,
High unemployment,
Currency debasement,
Public rioting,
Union intervention,

Gold tends to perform rather well.

Gold is not an asset to pass onto the next generation.

At some point it will collapse in price as it always does after the world sorts out its problems and we face another sustained boom.

Unforunately this is some years away. In the mean time enjoy the protection that gold has to offer and the following quotes;


'You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold'
George Bernard Shaw


'With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people'
Fredrich August Von Hayek


'All of the government's monetary, economic and political power, as well as its extensive propaganda machinery, will be enlisted in a constant battle to drive down the price of gold - but in the absence of any fundamental change in the nation's monetary, fiscal, and economic direction, simply regard any major retreat in the price of gold as an unexpected buying opportunity'
Irwin A. Schiff


'If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold'
Robert Ringer

 

[ringledman]

If and when governments finally decide that protecting the value of paper money is more important than keeping the illusion of short-term economic growth on the road, gold’s bull market will be over. Sadly, I suspect that’s a while away yet. Dr Marc Faber of the Gloom, Boom and Doom report reckons that ‘real’ interest rates (i.e. adjusted for inflation) in the US won’t move into positive territory “at any time in the next 10 years.” If your paper money is losing value, why wouldn’t you hold gold?


http://www.moneyweek.com/investments/forex-safest-way-to-play-the-currency-markets-00905.aspx

 

[george.shaw]

FT has two good articles on gold today:
Scramble for gold coins to beat tax increase
http://www.ft.com/cms/s/0/74825c32-6a93-11df-b282-00144feab49a.html?ftcamp=rss

Bullion has not yet lost its shine
http://www.ft.com/cms/s/0/91141ab2-6a83-11df-b282-00144feab49a.html

The gold bubble of the 1970s came to an end when western electorates, fed up with inflation, elected governments willing to impose recession instead. Faith in sound money was restored. Back then it took nine years from President Richard Nixon’s abandoning of the gold standard for gold to peak.
If the 2007 popping of the credit bubble is the modern equivalent of Nixon’s move, we have another six years of gold price rises to come. Unless governments have learnt the lessons of the past.

 

[george.shaw]

Great chart in the Wall Street Journal showing how gold looks to be only in the middle stages of its bull market:

There is no fever like gold fever and we are a long way from gold fever yet. More people in Ireland and the western world are selling gold in recent months (selling gold jewellery for paper euros) rather than buying. Most of the buying has been by the smartest hedge fund managers in the world (Soros, Sprott, Einhorn etc), pension funds and central banks and very few members of the retail public have any allocation to gold whatsoever. Ask your friends in the pub or at a dinner party have they invested in gold and they will likely either laugh at you or ask you what is bullion?; how do you invest? and even why would you buy gold?

DIVERSIFY people

 

[ringledman]

Great chart in the Wall Street Journal showing how gold looks to be only in the middle stages of its bull market:

There is no fever like gold fever and we are a long way from gold fever yet. More people in Ireland and the western world are selling gold in recent months (selling gold jewellery for paper euros) rather than buying. Most of the buying has been by the smartest hedge fund managers in the world (Soros, Sprott, Einhorn etc), pension funds and central banks and very few members of the retail public have any allocation to gold whatsoever. Ask your friends in the pub or at a dinner party have they invested in gold and they will likely either laugh at you or ask you what is bullion?; how do you invest? and even why would you buy gold?

DIVERSIFY people

You'll like this george.shaw-

Gold's no bubble - here are some real bubbles

May 27, 2010, 12:00
[broken link removed][broken link removed] Posted byMerryn Somerset Webb

Comments (1)
Earlier, I explained why we don't think the gold price has yet moved into bubble territory. You can read all about it here: Why gold is not in a bubble. But anyone who still isn't convinced might like to look at the graphic below. It puts the gold price into context next to real bubbles. The implication? There is a long way to go before gold hits the kind of levels that should make you want to sell.
[broken link removed][broken link removed]
Chart courtesy of Business Insider


Regards.

 

[george.shaw]

The notion that gold is a bubble is plain silly.

Gold hit new record highs in all major currencies yesterday and the Irish Times, the Irish Independent, RTE, Newstalk etc completely ignored it and did not even report it - not even one line.

Instead they devoted time as usual to the movements of that bastion of global capitalism - the ISEQ and the performance of individual Irish shares and the Bank of Ireland rights issue - http://www.rte.ie/business/2010/0609/mibusiness.html

When RTE and Newstalk and the Irish press feature gold on a regular basis and report the news that it has reached new record highs it might be time to sell your gold.

But the media covers gold once in a blue moon. It is discussed on AAM once in a blue moon and most retail investors do not even know what the price of gold is in dollars - let alone what it is in euros.

Suits me fine as can buy more gold (and silver!) at these prices before the real gold rush begins. Will start selling my gold when gold is featured as often as 'buy to let' and foreign property was on AAM and when the majoirty believe gold is a "cannot lose" investment.