The Gold thread

[conor_mc]

Someone who bought only equities in late 2001 would've been severely hurt by 2005. For that time frame, owning gold would've seriously relieved their inflation burden. You might call turning €500 into €1000 small beer, but it's serious money for most people.

Nobody "needs" a hedge, anyway. Hedges are about risk appetites, mostly. Also, the fact that it's tax-free is also important.

That's a four year timeframe for investing in equities.... that's a bit short, isn't it?

Seriously though, at 10k I'd concentrate on building wealth before adjusting strategy to conserving wealth. Turning €500 to €1000 is like an extra weeks wages for most people in Ireland now - it is small beer, no matter how you look at it. And that's coming from someone who isn't wealthy by any stretch of the imagination.

 

[room305]

Seriously though, at 10k I'd concentrate on building wealth before adjusting strategy to conserving wealth. Turning €500 to €1000 is like an extra weeks wages for most people in Ireland now - it is small beer, no matter how you look at it. And that's coming from someone who isn't wealthy by any stretch of the imagination.

Exactly, with these kind of investments amounts it is not really worth hedging your portfolio. Invest the €10k in stocks and try and build wealth over a minimum of ten years. Furthermore, invest in your career - you'll achieve a much higher return in a much shorter time frame.

As your wealth grows (through labour and investment) hedging strategies will play a greater role.

 

[rock3r]

Seeing as gold has outperformed equities altogether this decade so far, I think the numbers don't stack up behind the "put it all on equities and don't put any gold in until you're very far over 10K".

Gold is likely to be the single common optimum performer behind the majority of portfolios of which it's a part.

I'd say there's no portfolio so small it should be gold-free. Even professional equity-pickers are powerless to beat its results with any consistency.

It's kind of inevitable, when money supply constantly outpaces equity markets.

Sure, if gold gets to €1000/oz before 2010, it'll probably be a good idea for people to reduce holdings. But right now, very few asset classes can touch it.

It's the only thing that's valuable today that you know for absolute certain, will be valuable to people in 2107.

 

[beetlebum]

It's the only thing that's valuable today that you know for absolute certain, will be valuable to people in 2107.

you cant know that, i could discover alchemy works, and flood the market with gold!!!

 

[room305]

Seeing as gold has outperformed equities altogether this decade so far, I think the numbers don't stack up behind the "put it all on equities and don't put any gold in until you're very far over 10K".

Extrapolating the future behaviour of gold vs equities from a single decade worth of data is not exactly prudent investment. Equities outperforms every asset class over the longterm.

Gold is likely to be the single common optimum performer behind the majority of portfolios of which it's a part.

What does this sentence even mean - do you know?

I'd say there's no portfolio so small it should be gold-free. Even professional equity-pickers are powerless to beat its results with any consistency.

What about Warren Buffett, Peter Lynch, Benjamin Graham, Philip Fisher and emmm ... oh yeah, every yahoo who bought any of the US indices in the late seventies ...

It's kind of inevitable, when money supply constantly outpaces equity markets.

What does this mean? At what pace would the money supply have to grow so it didn't "outpace" equity markets?

Sure, if gold gets to €1000/oz before 2010, it'll probably be a good idea for people to reduce holdings. But right now, very few asset classes can touch it.

With a single kruggerand the opportunity to reduce your holding doesn't really exist. You either sell or you don't. I can only hope you weren't planning on listing ebay spot prices on this thread for the next three years.

It's the only thing that's valuable today that you know for absolute certain, will be valuable to people in 2107.

Hardly the only thing but it is certainly an easily accessible and convertible store of wealth for us common folk.

 

[rock3r]

Gold is an element.

A type of atom, not a type of molecule. To produce gold on demand, you'd need to be able to configure protons, neutrons and electrons into the precise configuration of gold.

They'll invent a time machine and cure death before that can be done.

 

[beetlebum]

Gold is an element.

A type of atom, not a type of molecule. To produce gold on demand, you'd need to be able to configure protons, neutrons and electrons into the precise configuration of gold.

They'll invent a time machine and cure death before that can be done.

I'm well aware of the atomic and sub atomic characteristics of Au, I'm also aware of the ability to create elements by bombarding one atom with another in facilities such as CERN in Switzerland. - but none of this is important here.

I was only trying to highlight the point that there is absolutely no way you can know with "absolute certainity" that gold will be a valuable commodity in 100 years time!!!



PS i also think alchemy may be easier (but still near impossible) than "curing death" or building a time machine!!

PPS the points room305 made as well are a far more interesting and intelligent rebuke, to your comments on gold investing.

 

[rock3r]

What about Warren Buffett, Peter Lynch, Benjamin Graham, Philip Fisher and emmm ... oh yeah, every yahoo who bought any of the US indices in the late seventies ...

They're good general investors, accross the whole financial spectrum. But you're deliberately choosing the best in the world. If you include all the other professional stock-pickers, their average goes way down below gold's 2001-2005 performance (which is the time at issue, not 1975-present).

At what pace would the money supply have to grow so it didn't "outpace" equity markets?

Equity markets grow at 7% annually on average. So for money supply not to outpace it, it'd have to be below that. But, in fact, money supply is growing at anything from 9% to 20% annually all over the world. Only in Japan is it low.

This creates an inevitable scenario where too much money will chase too few goods and services. This means that, as the Marxists used to say, that a structural tendency towards crisis exists in the global economy.

 

[room305]

If you include all the other professional stock-pickers, their average goes way down below gold's 2001-2005 performance (which is the time at issue, not 1975-present).

Yes but what exactly is your point? Do you not think it is potentially dangerous to look at the four year performance of one asset class and extrapolate future returns from it?

Equity markets grow at 7% annually on average. So for money supply not to outpace it, it'd have to be below that. But, in fact, money supply is growing at anything from 9% to 20% annually all over the world. Only in Japan is it low.

Do you actually check your facts or do you just make them up? What kind of sense does it make to take the average return on equities over more than a century and compare it to the growth rate of money supply (M3, M2?) in the past few years. Last year the S&P 500 returned nearly 16% - reformulated M3 was judged to be around 11%. Where does this leave your theory? Why is it relevant to either the future spot price of gold or equity investors?

This creates an inevitable scenario where too much money will chase too few goods and services. This means that, as the Marxists used to say, that a structural tendency towards crisis exists in the global economy.

Most of what you say sounds a bit half-baked, like you read a blog eulogising gold, digested it and are now regurgitating parts of it here.

I am not sure what your point is really. I guess if you want to make investment decisions based on a few years of data go ahead. Contrary to what you may read elsewhere, there is no direct correlation between money supply growth and gold spot prices. If you find any - present the links to appropriate charts and graphs here.

The best way to grow wealth is through equity investments over the longterm. Gold pays no dividends and anyone who bought gold at the 1979 peak is still down on their nominal investment before inflation is even considered.

You still haven't answered the most important question - if you think gold will continue to outpace equities, why are you so keen to sell? Perhaps you're just trolling and I'm stupid for wasting time replying.

 

[rock3r]

You still haven't answered the most important question - if you think gold will continue to outpace equities, why are you so keen to sell? Perhaps you're just trolling and I'm stupid for wasting time replying.

I think the most important question is this: if you really don't hate your wife, why haven't you stopped beating her up?*

Or maybe this question: If I'm the troll, how come you're the one asking questions based on bogus premises?

Just because I'd like to some day realise my profits in gold without getting a below-spot price, doesn't mean I'm keen to sell at present. You knew that or you need reading lessons.

*(For any mods who might think I've made an accusation: of course, I have no idea if he has a wife or not. But if you look at the wording, it's clear that it's a rhetorical trick question, just like his false allusion to my being "keen to sell gold" was.)

 

[www.gold.ie]

There have been a number of inaccuracies and misperceptions in the gold thread.

Perth Mint Certificate Minimum orders are $10,000 USD (some €7,400) and not beyond the reach of many smaller investors. The average SSIA amount maturing last Monday was €14,000.

Gold has not been a terrible investment. Importantly, it has outperformed both the S&P and Dow Jones since 1971 when the present fiat dollar non gold standard money system came into existence.

The fundamental tenet of investment theory is diversification. This tenet applies to all investors - individual, company and institutional.

"...from a portfolio diversification standpoint, holding gold has proven to be an excellent investment. We at the BIS hold a considerable amount of gold and in recent years have benefited considerably on a valuation basis from the rise in the price of gold."
Robert Sleeper, Head of the BIS Banking Department, 'How Central Banks Manage their Finances' Bank for International Settlements (The Central Bank's Central Bank)

An excellent article on gold and the Bank of england's gold reserves and Gordon Brown's incompetence appeared in the Sunday Times two weeks ago:
http://www.timesonline.co.uk/tol/news/politics/article1655001.ece

The fundamental tenet of investment theory is to be properly diversified and not have all the eggs in the one basket – whether that be the stock, bond or property markets. It has been shown in numerous financial and academic studies that an allocation of some 5% of one’s portfolio to precious metals is prudent.

Many financial professionals and investors worldwide recognise the important role that precious metals can play in stabilising and reducing volatility in a portfolio. This is particularly evident in the fact that the largest owners of gold bullion remain the world's Central Banks and the IMF ( US Federal Reserve: 8133 tonnes, the Bundesbank: 3440 tonnes, the Banque de France: 3024 tonnes and the IMF: 3217 tonnes).

Central Banks maintain their gold reserves as gold is the only asset class which is no one else’s liability, in order to maintain full faith in modern paper currencies and to protect against monetary crises as experienced by the Bank of England during the sterling currency crisis of 1992.

Jim Power, Chief Economist of Friends First believes gold is the asset class of the moment. "I teach Financial Management on a part-time basis in Dublin City University and a central tenet of what I teach concerns the virtues of portfolio diversification. I am a firm believer and have argued in numerous presentations on the topic of Property v Equities that it is not a case of either/or, but a case of both. I would be a big fan of holding gold as part of a diversified portfolio and would feel more confident about it than any other asset class at the moment."

 

[rock3r]

Sure, but there's a lot of people with less than four figure sums to invest. In Euro terms, that include the vast majority of individuals who own physical gold: the Indians.

Gold's easy to store and doesn't perish. Requiring $10,000 or even half that before you can purchase any gold effectively excludes 95% of humanity from investing.

The cheerleaders of gold at the World Gold Council say "Gold is the only real money".

Yet these same council members, who claim to be gold salesmen, say "you're in the 95% of the global population that cannot afford to pay our sky-high minimum purchase fee? Sod off then."

I know that gold.ie is doing the best it can in difficult circumstances.

But there is a global monopoly in gold which refuses to sell in small amounts. This needs to be broken and the companies who do successfully break that monopoly and profitably provide gold in small amounts to buyers will become very wealthy indeed.

For example, has anyone ever tried a rebate scheme? Buyer pays say €100 above spot price for a krugerrand, but gets the €100 back in a rebate after 6 months. Seller recoups transaction costs from interest on the rebate.

Rebate schemes work very profitably for all kinds of products, so why not gold?

 

[room305]

Rebate schemes work very profitably for all kinds of products, so why not gold?

Because people whose net worth amounts to less than $10k are often more concerned with obtaining food week-to-week than investing profitably in precious metals. Indian buyers are primarily gold jewellery buyers, although some rural areas with poor banking facilities also use gold as a form of savings.

I doubt many people are too worried about this supposed abomination of a gold monopoly but the Chinese government has continually lowered the barrier for gold purchases for its citizens so perhaps some progress is being made.

Alternatively, why not cease the entrepreneurial reins yourself?

 

[www.gold.ie]

Gold and silver can be bought for as little as €1/ $1/ £1 with Gold Money:
[broken link removed]

Also there are discussions with jewellers in Ireland in order to allow small investors/ savers to buy and sell small bars and coins on an incremental basis.

 

[rock3r]

Gold and silver can be bought for as little as €1/ $1/ £1 with Gold Money:
[broken link removed]

Also there are discussions with jewellers in Ireland in order to allow small investors/ savers to buy and sell small bars and coins on an incremental basis.

That sounds promising, hope that comes to fruition soon. Is this in Ireland only or more broadly?

I really feel that gold bugs (buyers, sellers and those of us who are both) need to get off their backsides and put an end to this silly situation where small buyers are excluded by big barriers. Gold requires no refrigeration, occupies a tiny amount of space, is extremely malleable etc.

It really oughtn't be so hard for someone with €100 to spend to pick up approximately that much, with a reasonable 5 or 10% profit for the vendor.

Those of us who want gold to succeed are shooting ourselves in the foot by allowing this situation to continue.

Incidentally, that's why I think there oughta be a pro-gold only thread in addition to this one, for those of us who do not debate the value of Au or think it is a barbarous relic, but who differ on ways to help gold succeed.

 

[rock3r]

Spain's central bank just dumped 28 tons of gold on the market. It seems Spain is having some kind of difficulty making ends meet. Does anyone know about this?

 

[room305]

Spain's central bank just dumped 28 tons of gold on the market. It seems Spain is having some kind of difficulty making ends meet. Does anyone know about this?

You mean right this minute? Doesn't seem to have bothered the gold futures market. Even thought gold held up well yesterday in light of the stock market sell-offs.

 

[gonk]

Spain's central bank just dumped 28 tons of gold on the market.

"just dumped" is a little misleading. It sold this gold throughout May, after sales of 40 tonnes each in March and April. Presumably these sales have already had whatever effect they're going to on the market. See here:

[broken link removed]

PS, wouldn't it be interesting to know how much of this gold originally arrived in Spain via the Conquistadors?

 

[rock3r]

True, I could have been more precise.

In fairness the futures markets are bemoaning gold's performance. Oil and equities in the USA are soaring, and despite the continuing deficits, gold is a laggard.

The small-time investor has left the market.

As well he might, given the fact of the barriers to entry.

When Joe Nobody can wander in off the street and buy a 5 gram pure gold wafer for no more than 2% over spot, gold will soar again, but not until then.

 

[room305]

In fairness the futures markets are bemoaning gold's performance. Oil and equities in the USA are soaring, and despite the continuing deficits, gold is a laggard.

You must have missed the last two days fun on the US indices then. Why would "continuing deficits" matter to gold?

The small-time investor has left the market.

Good. It was one of the reasons I bought back into gold in the last few months. When they start buying again I'll start selling.

As well he might, given the fact of the barriers to entry.

When Joe Nobody can wander in off the street and buy a 5 gram pure gold wafer for no more than 2% over spot, gold will soar again, but not until then.

Indeed. If it only it were so simple to buy gold as purchase a property, Joe Nobody could really get in on the action.