The Gold thread

W

walk2dewater

Guest
I'd like to start a discussion on gold:

(a) It's once again, after a long hiatus, entering mainstream conciousness as an investment
(b) It's very accessible and tangible for the average punter who can buy it 'over the counter' (e.g. www.gold.ie) or buy a precious metal unit trust through say, www.internaxx.lu

OK to start then. This is a nice short and sweet (5mins) item on gold that encapsulates a lot

Go here: [broken link removed]

Scroll down click on the 5pm show

View the interview between 34:20 and 40:00 minutes

I love the quote, "it doesnt cost anything to print another dollar bill"

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Should you buy gold?
 
Hey WTTW wait till I sort myself out before starting a bull run on gold. :D

I think that a gold allocation is a good defensive move at the moment, as the creditability of the Fed’s tightening policies is brought into question with the demise of M3 money supply data. Its also interesting to note that the M3 money supply data coming from the ECB suggests that M3 is growing by 8-9% well above what the ECB is comfortable with.

One important caveat, Gold or other precious metals investment is speculative; however it has proven to be a good hedge against inflation in the past. I still anticipate a credit crunch (to follow the present global debt bubble), caused by rising defaults and a widespread (global) property market reversal.

PS
I heard something today about my local property market that has sent chills down my spine, I am witnessing debt driven easy money mania here, big-time.
 
Duplex said:
PS
I heard something today about my local property market that has sent chills down my spine, I am witnessing debt driven easy money mania here, big-time.
Click to expand...

..care to elaborate or post in forum where it may be more appropriate?
 
My father-in-law has a stash of gold bars under his bed.

Not only does he get peace of mind in that he has his fortune in diverse mediums such as property, shares and gold, but he claims it also helps his rheumatism! ;)
 
Isn't it more preferable to invest in gold bullion through a quoted ETF which is backed by bullion held in a bank custodion eg Lyxor where amc is 0.4%pa and you don't have to worry about security, storeage and insurance. Because its a highly liquid market you can sell instantly.???
 
Duplex said:
PS
I heard something today about my local property market that has sent chills down my spine, I am witnessing debt driven easy money mania here, big-time.
Click to expand...

Come on, don't pique our interest like that and not tell us :)
 
ivuernis said:
Come on, don't pique our interest like that and not tell us :)
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As someone else pointed out, by all means tell everyone, but keep it for another thread eh?
 
walk2dewater said:
IShould you buy gold?
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As one part of an overall diversified portfolio, perhaps. Alternatively, why not buy shares companies involved in the gold industry (industries?) as an indirect punt?
 
Paddle:
“Isn't it more preferable to invest in gold bullion through a quoted ETF which is backed by bullion held in a bank custodion eg Lyxor where amc is 0.4%pa and you don't have to worry about security, storeage and insurance. Because its a highly liquid market you can sell instantly.???Paddlepuss, these two trade in US”

Clubman:
“As one part of an overall diversified portfolio, perhaps. Alternatively, why not buy shares companies involved in the gold industry (industries?) as an indirect punt?”

Yes and yes. GLD is popular bullion ETF and trades in NYSE and tracks the price of US$ gold.

http://finance.yahoo.com/q?s=GLD
http://www.streettracksgoldshares.com/index.php?noMsg=true

I’m not aware of ETFs available thru Irish or European brokers, maybe someone else can enlighten.

Buying individual precious metal mining companies is an extreme risky proposition, better to pick a unit trust (or mutual fund as they’re called in US/Canada). E.g. SGAM Fund Eq Gold Mines is available through www.internaxx.lu and up +100% in last 3yrs.

Owning the shares of precious metal companies exposes you to silver and other semi-precious and sometimes base metals as well and is considered a leveraged bet; as cost of extracting gold increases and demand increases the value of these companies rises faster than gold, similarly vice versa.
 
paddlepuss said:
Not US quoted, traded on LSE
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Whether you go the ETF route, the bullion route (www.gold.ie) or the unit trust route there's two important considerations for those just DABBLING with this asset class:

(1) Look at gold as an "insurance policy" for your wealth or alternatively a bit of diversification. In that case only say 2.5% to 7.5% of your net worth should be in this asset, and 'average in' slowly, at minimum 1/3 now, 1/3 later, 1/3 later again.

(2) Your position should be liquid. Should be able to sell or buy all or some of your position within a couple of business days

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Apart from the mechanics of how to buy, does anyone have any insights into WHY they would buy today?

I'm bullish on gold for two main reasons:

(1) I think we're coming to the end of a massive hyperinflationary period, besides DVD players from China and unprocessed foods, the price of everything else has and is sky-rocketing. CPI figures saying inflation is running 2-3% just do not look right to me. The world is awash with paper money looking for a home.

The recent rises in gold has confirmed this. Investors are turning to gold as a store of value.

(2) I think we're about to enter a deflationary period for assets (stocks, property, US bonds). Much higher interest rates than currently expected are going to turn the screws on debtors and cause consumption to fall. Leading to recession, further lowering of consumption and loss of the "feel good" factor. Employment will fall, further lowering income and hence consumption. Prices of assets will fall as buyers dry up and vendors flood the market. The mood may turn to panic, resulting is even less spending, more layoffs, lower prices.

In this scenario, gold becomes the ultimate safe haven

OK this is the worst case scenario, apocalyptic even, but even under a mild version of the above, gold should do exceptionally well against paper currencies. There appears to be little downside risk to gold and a whole lot of upside potential. Hence I'm averaging into a 30% position in gold by approx end of summer timeframe.

Comments?
 
ionapaul said:
If I bought GLD via my broker, would I be taking on an FX risk (a security held in $)?
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GLD is a currency :)
You want your gold to buy more paper currency, euros, yens, dollars, pounds, honduran lempiras, whatever, in the future
 
Should the speculation of the future values of individual commodities be allowed on AAM? Should be extended to include commoditites?
 
walk2dewater said:
(1) I think we're coming to the end of a massive hyperinflationary period, besides DVD players from China and unprocessed foods, the price of everything else has and is sky-rocketing. CPI figures saying inflation is running 2-3% just do not look right to me. The world is awash with paper money looking for a home.
Click to expand...

Are we really in a period of hyperinflation? I was under the impression that hyperinflation is inflation out of control and current inflation of 2-3% is only moderate? Of course certain things like property are running at much higher rates.


walk2dewater said:
(2) I think we're about to enter a deflationary period for assets (stocks, property, US bonds). Much higher interest rates than currently expected are going to turn the screws on debtors and consumption to fall. This is going to cause a recession, further lowering consumption. Employment will fall future lowering income and hence consumption. Prices of assets will fall as buyers dry up and vendors flood the market. The mood may turn to panic, resulting is even less spending, more layoffs, lower prices.
Click to expand...

If we entered a period of deflation wouldn't the actual purchasing power of cash become greater as the value of assets decrease, thus negating the need to hold gold as a store of value?

I think I'm slightly confused now ;)
 
ivuernis said:
If we entered a period of deflation wouldn't the actual purchasing power of cash become greater as the value of assets decrease, thus negating the need to hold gold as a store of value?

I think I'm slightly confused now ;)
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I guess if the value of assets decrease so too do the value of the companies selling them, therefore if you're looking for something to invest in then you should transfer your money from these companies to something more solid, ie gold.
 
ivuernis said:
Are we really in a period of hyperinflation? I was under the impression that hyperinflation is inflation out of control and current inflation of 2-3% is only moderate? Of course certain things like property are running at much higher rates
Click to expand...

The price of fuel, houses, cars, utilities, public transport you name it are SKY-ROCKETING... look at the CSOs wholesale price indices, everything is double-digit %s growth... OK DVDs players at Dixons are getting cheaper, so are shoes and most unprocessed foods, but most of my income doesnt go on these things... do you really believe the 2-3% story?

Yes during deflation cash would become "king", but I think gold might be more even valuable during the initial stages. The shock of a sudden change in sentiment/psychology could cause a run on gold... an event which I think may have started.
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Should you buy gold now or wait for a near-term price correction, to say €485/oz??????
 
walk2dewater said:
The price of fuel, houses, cars, utilities, public transport you name it are SKY-ROCKETING... look at the CSOs wholesale price indices, everything is double-digit %s growth
Click to expand...

Yes, these are all rising at unsustainable rates. I suppose my understanding of hyperinflation is a situation where things actually becomes unaffordable whereas what we have now is high inflation where people can still afford (admittedly mainly thanks to cheap credit) to buy stuff.

I'm not trying to debate the difference between where high inflation ends and hyperinflation starts though. I'm quite happy to agree that OVERALL inflation is way too high and to call it whatever feels appropriate.


walk2dewater said:
do you really believe the 2-3% story?
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No, not at all!


walk2dewater said:
Should you buy gold now or wait for a near-term price correction, to say €485/oz??????
Click to expand...

This is what I'm unsure of though. You hear commentary that gold has hit a high and will probably fall back again while others say it's just the start of a long bull run. I suppose gold had dropped in value for a long time and maybe what we are seeing now is a realisation of this with the current value being more realistic. I'm just shooting from the hip here though but I still think I'll put upto 5% into gold once I'm liquid in a few months time.

 
ivuernis said:

You hear commentary that gold has hit a high and will probably fall back again while others say it's just the start of a long bull run. I suppose gold had dropped in value for a long time and maybe what we are seeing now is a realisation of this with the current value being more realistic. I'm just shooting from the hip here though but I still think I'll put upto 5% into gold once I'm liquid in a few months time.
Click to expand...

Which is why I’d advocate ‘averaging into’ a position. I like investing in mutual funds cos my broker allows me to add small, automatic amounts weekly to my position for same price as a lump-sum trade. I end up getting an average price over the course of time rather than an “all or nothing” approach. At an absolute minimum you should invest your targeted % in three tranches 1/3 now, 1/3 later and 1/3 much later.

I wouldn’t rule out a fall in gold relative to all paper currencies in the near-term, say US$485/oz, but that’s ok cos my average price is much lower, and my weekly purchases means I’ll pick up more at the lower price.
 
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