Is gold a good investment

george.shaw

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See he was interviewed on RTE as well:

RTE Radio 1: Interview - Gold Investments’ Mark O’Byrne says talk of a 'gold rush' is exaggerated
http://www.rte.ie/business/2009/0220/gold_av.html?2495255,null,209

Said that gold was not a bubble as bubbles involve mass participation and that less than 2% of retail investors have any allocation to gold whatsoever - let alone being overweight gold.

No gold fever yet but there will be when gold is trading at $2,400/oz plus - then we will see a gold rush -
no fever like gold fever!
;-)
 

PMU

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If I wish to invest in gold, and if I were, for example, on holiday in a country with a gold souk, e.g. the Dubai Gold Souk http://en.wikipedia.org/wiki/Dubai_Gold_Souk can I just purchase a hoard of gold coins or a lump of bullion and take it back it Ireland as if it were cash? Is this legal? Are there any tax implications?
 

george.shaw

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Best to buy popular, well known and more liquid bullion products that you can easily resell in Dublin, London, New York - so government minted legal tender bullion coins such as Canadian Gold Maple Leafs or Austrian Philharmonics are best as are respected refiners bars such as Johnson Matthey or Credit Suisse gold bars.

Internation bullion dealers make a market in and automatically buy back thse gold bullion products but they will not do that with jewellery or some exotic Middle Eastern gold bar or coin.
 

joe sod

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"Do any of the people promoting gold in this thread have any vested interest(s) in promoting the puchase of gold? "

the gold market is such a huge international market that no poster on askaboutmoney would have any affect on it , no vested interests in ireland or any country can affect the gold market , only the ecb, fed or the asians could have any affect on it
 

ringledman

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Did anyone read the article in last Friday's Irish Times? It was on page 8 of the financial section titled "Investors struck by Gold fever". Overall I thought it was a fairly balanced review of the situation. Anyone got any views on it, especially the comments by Mark O' Byrne of www.gold.ie ?

Here's the link to the article...
http://www.irishtimes.com/newspaper/finance/2009/0220/1224241488386.html

Short term correction due I feel with the press starting to talk up gold. Also getting a bit too much coverage on forums like this.

Also a guy in work mentioned buying gold soon which isn't a good thing to hear as a contrarian.

Nonetheless the long term fundamentals are strong.


From Moneyweek. An interesting read-


The real story of gold, inflation and deflation

By Adrian Ash Feb 26, 2009
Gold: not a hedge against inflation

Gold's previous bull market, ending with the sharp run up to $850 per ounce in Jan. 1980 and rising more than 24 times over for dollar investors, came in the 1970s.

That decade gave us soaring inflation, too. So gold, or so everyone says, must deliver its strongest returns when the cost of living shoots higher.
Right? Not quite.

"In the long run, stocks have thrashed gold as great long-term hedges against inflation," as Jeremy Siegel, professor of finance at Wharton University, Pennsylvania, has shown. What's more, the eight-year bull run in gold prices so far this decade has come against the lowest average consumer-price inflation since the early 1960s.

In other words, the common opinion of gold as first and foremost a defense from inflation is wildly awry, if not amiss – a point those investors now ready to buy gold should consider.

Just look at the last 30 years. Consumer prices in the United States, even on Washington's data, have pretty much trebled since 1980. But starting at what was then an all-time high of $850 per ounce, gold simply failed to keep pace. In fact, it dropped half of its purchasing power (monthly data).

At worst, back in 2001, gold's loss of purchasing power for US investors reached beyond 85%. The broad S&P index, on the other hand, stood more than eleven times higher, even as the Tech Crash pushed US equities into a nosedive.

Oh sure, things have reversed a little since then. But not enough to reverse the cold fact of gold's losses during the long, grinding inflation of the late 20th century. It may not have forced an inflationary panic amongst investors; they were happy to buy bonds (corporate and sovereign) even as inflation chipped away at the promised yields. But savers saw the value of their cash shrink by one-half across the developed world, and by far worse across the emerging economies.

How can we square it with gold's miserable losses between 1980 and 2000?
"Well," you might hazard, "perhaps gold bullion only responds to rapid inflation – the nasty kind we got in the late '70s, rather than the 'mild' case our money has suffered ever since?"

But again, you'd be wrong – or very close to it. Between 1980 and '81, consumer price inflation in the US destroyed 17 cents of the dollar's purchasing power, an ugly depreciation by any reckoning. Yet the dollar price of gold dropped 40% during that same period. Longer term over the 1980s and '90s – a truly horrific period of sustained inflation, then averaging 4.6% per year and vicious by any twenty-year comparison in history – the real value of gold sank by more than four-fifths.

Look further back – even to when physical gold stored in government vaults underpinned the dollar, just as it underpinned all major currencies – and you'll find that gold almost always made a poor hedge against rising prices. In the mid-70s, Professor Roy Jastram at the University of California at Berkeley found that gold failed to keep pace with the cost of living during seven inflations in Britain across more than three centuries. In the United States, Jastram spied
six inflationary periods between 1808 and 1976. On average, they saw the purchasing power of gold fall by more than one-fifth!
Only the final period in Jastram's study – beginning in 1951 – saw the metal gain value, and it continued to gain purchasing power for the next 30 years. By the end of 1980, the average annual price of gold had risen more than 17 times over. But right from that top it was downhill for the next twenty years.
How come?

What changed at the start of the '80s? Two things in short order. They were entirely connected.
First, Paul Volcker – the famously tall cigar-puffing chairman of the US Federal Reserve – raised dollar interest rates to nearly 20%. So second, and as a direct result, the rate of inflation sank from that record peace-time spike above 14%.

Volcker's strong medicine took nearly two years to slow the rate of inflation. But it killed the gold price almost instantly. Before Volcker hiked rates – and before he and his successors gained ample room to cut them year after year – "There was a kind of great speculative pressure," as Volcker since said. The Fed noted how "speculative activity" in the gold market was spilling into other commodities. One official at the US Treasury called the gold rush "a symptom of growing concern about world-wide inflation."

So yes, people piled into gold as double-digit inflation and collapsing bond prices destroyed their savings at the end of '70s. And yes, it took a record return paid to cash for the devaluation of money to slow down, allowing a cautious return to risk assets like corporate debt, listed equities and new private ventures – assets whose long-term appeal rests on stable costs and expenses, rather than a speculative guess at how the central bank might set its interest rates from one month to the next.

But now, in contrast, Britain stands on the brink, the United States will likely confirm it on Friday, and Japan's pretty much there – yet again – suffering the horrors of inflation's bleak evil twin, deflation.

So why is gold hitting new record highs?

Before the 20th century, short periods of falling prices were as common as scurvy, and just as harmless for the long-term value of money and assets. Indeed, deflation is a good thing, for savers at least. Provided their savings institutions stay solvent. And provided their cost of living actually goes down faster than the value of the assets they've saved. Which is not what's happening today. And that brings gold's other key feature – the one investors should note if they buy it as a tightly supplied metal that shot higher in price when inflationary panic struck in the late '70s.

Because fact is, gold also offers a deep, liquid market (if held in its internationally tradable form of large wholesale bars) with no risk of counter-party default (if owned outright, rather than through a trust or a fund or a similar financial structure).

In our debt-deprived world today – where the outstanding value of what retirees and savers are owed is deflating much faster than costs – it's this attraction of gold...it's "off risk" advantage... which is fast-gaining appeal amongst large funds and private investors alike.

Inflation and deflation – both a crisis in money – both also force business and growth to give up. What remains, paying zero and promising nothing, is the need to simply store wealth and savings for a better tomorrow, whenever (or if ever) it shows.

Adrian Ash is editor of Gold News and head of research at BullionVault
 

joe sod

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i invested in gold but much more in silver in 2005, i havn't increased or decreased investment since then, the silver market which follows gold is incredibly volatile it was higher in may 2006 than it is today but it fell from a long term high of $22 to below $9 all in 2008, and now has risen to above $13, is this really a safe haven investment, even gold dropped substantially during the credit crunch, how many amateur investors are prepared to stick with this sort of investment, the truth is that long term investors in gold or silver are only in it because they dont believe in the macroeconomic situation in the world, but things are now changing the financial services industry is being routed and waste and corruption is being exposed, the easy money is gone and so now are the easy jobs, the global economy is contracting but real industry will survive, it is the froth that is being blown away, this is a necessary process, marc faber one of the first to predict the return to gold as an investment is saying he now prefers industrial commodities and even high tech companies like intel and cisco
 

george.shaw

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You are factually incorrect there Joe and that is leading you to erroneous conclusions - bad data in - bad data out.

"even gold dropped substantially during the credit crunch,"
This is incorrect and brings to mind the phrase - "lies, damn lies and statisitics".

Gold was at $650/oz at the start of the credit crunch (most people accept first phrase of credit crunch was marked Bear Stearns collapse in August 2007).

Today gold is at $950/oz and is one of the few asset classes to have risen in recent months and years.

Importantly, in the worst deflationary period since the Great Depression, gold was up in 2007 and in 2008 in dollar terms and up by even more in sterling and in euros. Important for Irish investors to think in local currency terms.

Silver is undoubtedly very volatile but is up nearly 100% in 5 years (150% in sterling terms) whereas most major stock markets are down some 20% to 60% (ISEQ).

Marc Faber remains bullish on gold and on all finite tangible assets as can be seen here:
Marc Faber: Gold Will Hit $3,000 Per Ounce
http://seekingalpha.com/article/5313-marc-faber-gold-will-hit-3-000-per-ounce

Marc Faber says Fed responsible for global crisis, gold prices to exceed Dow Jones index
http://www.bi-me.com/main.php?id=31904&t=1&c=62&cg=4&mset=

Never let the facts get in the way of a good argument.

Might be a good idea to remain diversified and have an allocation to equities (including some tech), commodities and most importantly silver and gold.

This is especially the case as Warren Buffett is now warning of the onslaught of inflation and the inflation of the 1970's was not kind to stocks with the DJIA staying at around 1,000 from 1968 to 1982.
 

george.shaw

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ps
not one of the Irish Sunday papers even mentioned gold - let alone covered gold in the completely uncritical, ridiculously positive light that they covered equities or property in recent years.

when the soaring price of gold (and the fortunes made from it) becomes front page business news on a regular basis in the Irish and international press then the man in the street will join the party and we will be in a bubble and the smart money will head for the door.

not there yet.

diversify.
 

cancan

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Geroge.
My taxi driver was going on about gold at the weekend, along with every second person you meet in pubs.
I live in the us.

Just because the irish papers are not touting it, does not mean that the rest of the world are not saturated in gold vi spin.


The irish market for gold is bloody tiny compared to the world at large.
Investors should keep that in mind.

Also remember, when in a bubble, people will not listen to reason.
The amount of gold spin here is worrying.

No matter what way the price goes, the high risk nature of this investment remains.
 

North Star

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I contributed to the article in the IT and have no conections or vested interests in pushing Gold. It has and can continue to perform given the risk envirinment i.e safe haven buying. That however wont protect the price of Gold from market forces. If everyone is already bullish, where does the new buying come from? if the longs start to unwind there could be a material retracement. One of the investment "experts" I have followed for a long time has been long of Gold for some time and is now reducing his exposure due to the fact that too many people are now bullish of gold and have that trade/investment position in place. Gold clearly has it place as part of a diversified portfolio. Like any investment there is always risk, Gold is not a risk free Holy Grail
 

ringledman

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There are allways bullish spells in the general press for assets still in the early stages of their bull cycles. These however are few and far between.

We may get a short term downtrend based upon joe public piling into ETF's on which they will bail once gold goes down to 850 or so. This will start the next long term uptrend.

Like George Shaw says, once every paper covers it and more importantly once financial advisors recommend getting into gold (in the way they recommended commercial property in 2006-07) then sell!!!
 

bogle

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...a short term downtrend based upon joe public piling into ETF's on which they will bail once gold goes down to 850 or so. This will start the next long term uptrend...
Any chance of the Euro-millions lotto numbers when you're at it :p
 

george.shaw

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Not just the Irish papers who rarely if ever cover gold and when do is often biased and negative - same in UK and even in US.

Although there is a hard money tradition in the US ( the US constitution prohibits use of paper money - "make any Thing but gold and silver Coin a Tender in Payment of Debts; " - http://www.constitution.org/constit_.htm ) and many US citizens who are aware of the fragility of the international financial system and indeed the modern fiat based international monetary system.

Interesting re taxi driver in US - say he was one of the smarter taxi drivers in the world! I always ask my taxi driver do they know anything about gold, it's price in dollars or euros and how to invest? Not one has ever said he knew anything about gold. Most still think Eastern European property is still the place to be and aren't even aware that Eastern Europe and Baltic is now in meltdown as well.

Agreed that gold is not a risk free holy grail - nothing is at the moment but gold is the closest thing to a risk free holy grail in the world today and likely to remain so for foreseeable future.

It is crucially important that investors always adjust for inflation when analysing assets and gold remains less than half the price it was in 1980 - $2,400/oz. Likely to get there in the coming years and then it will be time to take profits and reinvest in very cheap property and equities.

Faber, the most respected contrarian in the world, (unlike many of our faux contrarians in Ireland who never warned re the massive overvaluation of equities and property in recent years) believes that DJIA and gold will again reach the same value as they did in 1933 and 1980.

That would mean gold at some $4,000/oz and the DJIA at 4000 or some combination thereof. Not beyond the realms of possibility considering the DJIA is down another 3.5% today to 6841 and was at 4000 in 1995 when it began it's parabolic ascent to over 13,000 began.




Great inflation adjusted chart in the Economist this week:

Burnished by bad news, gold looks like a good each-way bet
http://www.economist.com/finance/displayStory.cfm?story_id=13185396&source=hptextfeature
 

ringledman

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Any chance of the Euro-millions lotto numbers when you're at it :p
Read the WHOLE POST and don't just selectively cut a section out.

I said 'WE MAY' get ...a short term downtrend.

Is that your contribution to this discussion? great.

My view remains that in any long term SECULAR bull market there are ups and downs in which the public represented by the press get excited then get cold feet once the asset falls in value. this is a natural reaction to the CYCLICAL trend within a rising SECULAR market.

This does not however deter from the fact that the asset is in a general secular bull market and will rise over the long term.
 

george.shaw

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Charlie Weston was just on Newstalk and was negative on gold. He has barely if ever covered gold in the Indo. Said something like "lots of people" say that gold is probably overvalued as has risen a lot in recent years.

No mention that gold is less than half the price of it's all important inflation adjusted high as per Economist article above.

Pity Charlie doesn't even now tell people to properly diversify and have a small allocation to gold as part of that diversification.

Pity Charlie didn't warn investors that Irish bank shares, equities and property had risen a lot and could be overvalued when the dogs in the street knew it to be true.

When Charlie and other personal finance journalists advise investors that they should have an allocation to gold, then may be time to take profits in gold.

Amazing that even now the "financial experts" do not get the concept of real diversification and how little the 'financial experts' know about gold and the fundamentals driving the market such as central bank demand:

Major economies eye boost to gold reserves
http://www.guardian.co.uk/business/feedarticle/8382521

Economy may cause gold to gleam again
http://www.ft.com/cms/s/2/9c2f6d60-0509-11de-8166-000077b07658.html

Gold May Rebound on Demand for Haven Amid Financial Turmoil
http://www.bloomberg.com/apps/news?pid=20601081&sid=aKZqCFbnjvoE&refer=australia
 

33cl

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Does anyone know what McWilliams opinions on gold & silver are? He seems to be one of media's 'economic gurus' at the moment, they cant get enough of him. Smart boy that he undoubtedly is, i'm sure he's not a god.

George - perhaps Charlie has a hoard of gold locked away somewhere which explains his 'nothing to see here folks' attitude.
 

george.shaw

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MvWilliams in fairness has been correct in his analysis. He has said that if hyperinflation takes off in the US (which seems quite possible) then gold wll be the asset to own:

McWilliams: Could Obama be remembered as the man who presided over the greatest hyperinflation ever?
http://www.independent.ie/opinion/columnists/david-mcwilliams/new-president-needs-to-run-up-a-frightening-debt-1608220.html
All this implies that Obama could quite conceivably preside over a period of hyperinflation. Today this seems impossible but he has inherited such a mess from George Bush and his political need to get the economy going, if he is to deliver on some of his immense promise, might just prove too much. Don't take my word for it, just look at what is happening to the price of gold -- the only real hedge against hyperinflation.

Think that is a bit harsh on Charlie and sure he not that cynical. Just think he is very unaware of economic and monetary history (like most in Ireland) and blindly accepts the prevailing view that deflation is the only risk, cash is king and that sure things can't get that bad - the governments and central banks will sort it all out.

But as my namesake GB Shaw astutely noted
"You have to choose, as a voter, between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."

Such blind faith by much of those working in the financial services industry in Ireland in banks, central banks, regulators and governments, is what got us into this mess. And yet it continues today.

diversify.
 

cancan

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Gold down ~10% in a week.

Hope people have a good stomach for risk.
Dollar continues to get stronger.

Double whammy of currency risk and asset risk for euro investors...

For the brave only.
 

george.shaw

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Incorrect again Cancan.

Opposite is the case - as dollar has strengthened and all other fiat paper currencies including the euro have fallen sharply in value versus the dollar and versus gold.

This means that gold has surged in value in all currencies and is even up some 5% in US dollar tems since the start of the year.

Most stock markets are down 15% since the start of the year.


Perf table will not paste!


Performance table above shows that gold in euro terms is up 15% since start of the year while the Irish stock market is down 16%.

Looks like equities are only for the brave now and for the foreseeable future.

diversify!
 
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