# Is gold a good investment



## cisco

would it be a good idea to buy gold now.
anyone know if this can be done online.


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## soy

There is a very extensive thread on everything you could ever want to know about Gold as an investment. Try a search for Gold using search function in the menu bar on the top of this page.


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## sam1

Yea gold is a good buy when all the real estate prices and stocks are taking a beating... gold prices seem to be maintained high.. so it should be a good investment.


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## dunkamania

Gold is priced in USD, so saying its price seems to be maintained high ignores the moves in EUR/USD


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## lemur

cisco said:


> would it be a good idea to buy gold now.
> anyone know if this can be done online.



Cisco - You can buy physical at either Goldmoney.com or Bullionvault.com. They also store it v cheaply for you. 

You can buy gold futures with the spreadbettors if you know how to speculate on the price action.


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## smiley

Warren Buffett emphasized the non-productive aspect of gold in 1998 at Harvard: "It gets dug out of the ground in Africa, or someplace. 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." 

In 1977 Buffett was also quoted as saying about stocks, gold, farmland, and inflation: "stocks are probably still the best of all the poor alternatives in an era of inflation - at least they are if you buy in at appropriate prices."


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## george.shaw

Warren Buffett is a very smart man but not all knowing and not God . 

He clearly has a blind spot regarding gold. This may be his downfall and the believers who follow him downfall. His lack of diversification and overwhelming focus on stocks is likely to lose him a lot of money in the coming years, as it has in recent months.

‘A beginner's guide to investing in gold’ is worth a look at:
http://www.moneyweek.com/investments/precious-metals-and-gems/a-beginners-guide-to-investing-in-gold.aspx 

Gold is a safe haven asset and the only asset class that is not someone elses liability and this is why it is thriving in the current environment and ws one of the only asset classes to be up last year. It will likely reach its inflation adjusted high of $2,300 per ounce in the next few years.
Gold is the only finite currency - as JP Morgan once testified to Congress, "Gold is money and nothing else". Even more pertinently and more recently Alan Greenspan said "Gold still represents the ultimate form of payment in the world. . . . Fiat money, in extremis, is accepted by nobody. Gold is always accepted" (Speech to Senate Banking Committee in May 1999). 
This is a very important consideration when central banks internationally are printing currency on an unprecedented scale.

‘Gold to rise for eighth consecutive year’ 
http://www.telegraph.co.uk/finance/personalfinance/investing/4162212/Gold-to-rise-for-eighth-consecutive-year.html .

Merrill Lynch says rich turning to gold bars and not etf’s for safety
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4177766/Merrill-Lynch-says-rich-turning-to-gold-bars-for-safety.html


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## dunkamania

What with still being the richest man in the world, I think he will survive.......


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## george.shaw

Buffet will more than likely "survive" 'dunkamania' but that is not the point or the question asked by 'cisco' which was "Is gold a good investment?".

Richard Russell, the highly respected investment newsletter writer wrote a very good article on why Warren should have listened to his daddy recently:
http://www.321gold.com/editorials/russell/russell121708.html


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## 33cl

I bought €34,000 worth of gold in Feb 07, it's now worth just over €40,000 which is a 17% gain. Not great but better than any regular savings accounts here and what with the continuing global financial crisis and the dollar decline, I'm holding on to it. If you look at charts of the gold price in € and $, they've followed a fairly similar pattern in the last 8 years, despite € strengthening vs the dollar. Gold & silver = ancient and trusted form of currency worldwide and classic hedge against inflation, where as Euros and Dollars not backed by gold = fiat currency created out of thin air practically.


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## PaddyBloggit

33cl ..... how do you buy gold? etc.


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## jimbobman

deflation will bring down the price of gold over the next few years


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## george.shaw

Jim bob: "deflation will bring down the price of gold over the next few years." 

No one has a crystal ball Jimbob and you are likely to be proved very wrong.

2008 saw possibly the worst deflationary crash since the 1930's with major property markets and equity marlets down between 20% and 50% and yet gold was up some 7% in US dollars, 10% in euros and over 40% in sterling terms.

Also worth recalling that during the Great Depression, the Dow Jones fell by 90% and property markets by some 50% and yet gold rose by 60%. The dollar was backed by gold and Roosevelt devalued the dollar and revalued gold by 60% from $22/oz to $35/oz.

Thus even during the worst deflationary crash in modern economic times, gold handsomely rewarded those who owned it.

As ever best to be properly diversified and be prepared for all scenarios - deflation and a possible systemic crash, stagflation and hyperinflation.


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## Chris

I agree with goerage.shaw.
The low inflation and possibility of deflation is mainly due to lots of companies going out of business and the subsequent closing down sales (in my opinion). What also has to be considered is that prices rise when there is more money competing for a limited supply of goods and services. With all the bailouts around the world, printing presses will be working overtime in the next couple of years (especially the US one with a predicted $1trillion this year). Monetary inflation will inevitably lead to price inflation, with a possibility of hyperinflation.
Bottom line is that a well diversified portfolio will include gold regardless of economic environment, and it is a very good 'insurance' against hyperinflation (however large or small that possibility may be).


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## dunkamania

george.shaw said:


> No one has a crystal ball Jimbob and you are likely to be proved very wrong.


 
Am I the only one who saw the irony here..........


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## george.shaw

Might be an idea to look up the meaning of the word "likely" Dunk.

A case of attacking the man and not the ball me thinks - and this is the second time.

Askaboutmoney Forum guideline 19 might be apposite 
19. Please stay on topic 

Obviously have an issue discussing the actual thread which is whether "gold is a good investment".


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## Guest116

dunkamania said:


> Am I the only one who saw the irony here..........


 
no,  give me a laugh anyways


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## george.shaw

1. Was just reading about your namesake last week Aristotle - in a book called ‘Gold: The Once and Future Money’
2. http://books.google.ie/books?id=m82jozV3Qw4C&pg=PA22&lpg=PA22&dq=plato+slave+gold+money+aristotle&source=web&ots=MOVU5Q2E8K&sig=T_wJ7uAPe0YQYaDiC-TKIhhNOvE&hl=en&sa=X&oi=book_result&resnum=2&ct=result#PPA19,M1 

Great story of how Plato thought money did not need to be gold and or silver and advised the King of Syracus to use tin and to put a higher fiat value over the intrinsic value of the tin. The currency quickly failed and the economy collapsed and Plato was promptly sold into slavery by the king. 

Plato’s pupil Aristotle rejected soft money and debased currency and believed that money should be gold and silver coinage and not base metal or paper. He advised Alexander the Great and Alexander adopted his hard money system which helped lead to a monetary system based on silver and a stable economy throughout the Mediterranean and in the Middle East.


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## Askar

Were cocoa beans not currency at some stage in the Inca empire of South America?

Why would gold or silver work any better as a currency then tin?

How, practically speaking, would gold insure you against hyperinflation? Can you get your gold bars and melt them down into little pieces and start bartering for your dinner??

I suppose the bulls have to find something to get excited about.


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## george.shaw

Gold is the only currency that has retained value throughout history and that is because it is extremely rare. If all the gold in the world were refined (made 0.9999 pure) and formed in a huge cube it would fit nicely on centre court on Wimbledon or beneath the Eiffel Tower.

Basic law of economics is supply and demand. Gold supply is only increasing at some 2% per annum and rate of increase is decreasing whereas international money supplies are growing at between 10% at low end of spectrum to 100's of percent at high end of spectrum.

The supply of gold is very small unlike tin and is finite unlike cocoa beans - more cocoa beans can be produced and crop substitution can take place.

Paper money is not finite and is increasingly being printed and supplied at unprecedented rates which will see the purchasing power of all paper currencies greatly diminished in the coming years. The price of goods will not go up rather our purchasing power will fall sharply once the vicious deflation we are currently experiencing abates.


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## george.shaw

ps re the comment: "How, practically speaking, would *gold* insure you against hyperinflation? Can you get your *gold* bars and melt them down into little pieces and start bartering for your dinner??"

Gold is the only thing that protects people in deflation (1930's America) and hyperinflation as people in Germany in 1920's and throughout history have experienced.

Those who invested in gold in Zimbabwe and in Iceland today have been protected from economic meltdown. Gold has risen 1000's of percent in Zimb and in our neighbours to the north gold has risen by more than 200% in Icelandic krona in the last few months. 

People in these countries who have invested in gold can sell their gold (gold is highly liquid unlike property) and get Euros, dollars or icelandic krona and they then can buy property, agricultural land and productive businesses at incredibly cheap prices.

Not something to get excited about but important to be aware of economic history and economic reality.


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## lotus

I have read a good few articles in the personal finance sections of the daily/Sunday newspapers advising investing in gold and they mention investing in a Gold ETF(Exchange Traded Fund).  

How can I buy into one of these funds? Online broker?  Are they listed through the Irish stock exchange?  What is he minimum amount that can be purchased?


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## lemur

If you want to buy some gold - and I would recommend this - then the best way to do it is through Goldmoney.com or Bullionvault.com.


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## Pennyscraper

Yes, Either of thse websites. Very recommended. Buy the physical asset. Too late for gold ETFs without being exposed to some risk by the sellers of those ETFs.

Also, keep a close track on gold by listening to Larry Edelson on MAM-TV. www.moneyandmarkets.com Gold will hit €2500, i.e. inflation adjusted high, he says, before end of 2010.


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## george.shaw

Agree with u Pennyscraper re ETF's - way too much counter party risk and also 0.5% charge per annum, broker fees and stamp duty make it pricey way too own gold, especially for medium to long term.

Digital gold is not a bad way of owning but one also has significant counter party risk, nationalisation risk and the not insignificant risk of their massive dependency on technology. Digital gold is entirely dependent on the interface with a website and one cannot take delivery of one's gold (important option to have in the current climate).

Best not to have your golden eggs in any one basket and to own physical gold like gold bars or coins in an allocated account, safety deposit box or hidden away in the attic (with home insurance)!


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## Askar

george.shaw said:


> ps re the comment: "How, practically speaking, would *gold* insure you against hyperinflation? Can you get your *gold* bars and melt them down into little pieces and start bartering for your dinner??"
> 
> Gold is the only thing that protects people in deflation (1930's America) and hyperinflation as people in Germany in 1920's and throughout history have experienced.
> 
> Those who invested in gold in Zimbabwe and in Iceland today have been protected from economic meltdown. Gold has risen 1000's of percent in Zimb and in our neighbours to the north gold has risen by more than 200% in Icelandic krona in the last few months.
> 
> People in these countries who have invested in gold can sell their gold (gold is highly liquid unlike property) and get Euros, dollars or icelandic krona and they then can buy property, agricultural land and productive businesses at incredibly cheap prices.
> 
> Not something to get excited about but important to be aware of economic history and economic reality.


 
So when was gold proven to be a good hedge in Irish economic history?


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## ronaldo

Askar said:


> So when was gold proven to be a good hedge in Irish economic history?


 
To be honest, in past decades before the joining of the EU, I don't think Ireland was as prosporous as other countries and, for most, investments weren't really on the agenda as much.

Regarding Gold, I have a portion of my portfolio in gold but not physical. I went for the riskier, potentially more rewarding option of purchasing shares in one of the Gold miners.


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## LouisCribben

I enjoyed reading this thread, some great comments were made, not least the comment that all the gold in the world would fit on the centre court of Wimbledon. Wow.

A lot of posts say gold is a good investment at its current price. I'd like some reasons for this to be put forward by those who say gold is currently undervalued.

If we had high inflation , it would be a good hedge against inflation.
But we don't have high inflation.

If we bought in a currency which is going to lose value relative to other currencies (like sterling did last year), then it would be a good idea to buy gold.
But it's not possible to predict the falling relative value of a currency in advance.

To say gold is a good investment is to also say gold is undervalued at it's current price. Could someone explain why is gold undervalued at it's current price ?

Also Gold has risen a lot in the past few years. Why should it rise further ? Could there be a gold price bubble ? It's maybe like someone in Dublin in 2006 saying house prices have risen 10% every year for the past 10 years, therefore they will rise 10% in 2007.

I can't see any evidence that gold is undervalued. It is priced at a level the market thinks it should be priced at. It could go up or it could go down depending on factors which are not knowable in advance. As soon as these factors become known, the market will reprice it.


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## UptheDeise

Hi Everybody,

I am serioulsy thinking about buying gold as well. The site I'm looking at is GOLD.IE. Has anyone ever used this site to buy their gold? If so, what was you experinence?

Any tips or suggestions greatly welcomed.

Thanks,

UptheDeise


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## george.shaw

Never used Gold.ie but have never heard any complaints and they are respected internationally (featured in FT, WSJ, Bloomberg, CNBC and BBC).

re _So when was gold proven to be a good hedge in Irish economic history?_ 

Those lucky enough to own gold since the foundation of the state have done well. As gold was fixed at $22/oz and then $35/oz until 1971 meaning that those who held gold were not subject to the fall in value of the punt. (or falls in stock markets and occasional falls in property markets).

In the stagflationary 1970's gold protected Irish investors when stock and property markets were not performing well. 

Last year gold was up 8% in Euros and the ISeq was down by more than 60%.

Similarly in the last 5 years gold is up in euro terms some 100% and the Iseq is down by more than 55%.

Gold remains undervalued. Gold rose by more than 2,400% (from $35 to $850 or up X 24 times) in the 1970’s . Should a similar bubble form now gold would have to rise from a low of $250 in 2000 to over $6,000/oz in the coming years.

Gold is one of the few things in the world that can still be bought at the same nominal price it was in 1980. As ever it is crucial to adjust for inflation and gold would have to rise to over $2,400/oz or €2,000/oz in order to just reach the price it was in 1980.


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## jimbobman

do ye not think that ye are late to the party. gold has been making lower highs since it hit 1035 an ounce last year. deflation will bring this price down , not up


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## george.shaw

In a conventional bout of mild deflation gold might fall but when we have the risk of a global financial and economic crash and huge systemic risk it is highly unlikely gold will fall. Even in the Great Depression it was revalued from $20/oz to $35/oz or some 70% while the Dow Jones fell some 90% peak to trough.

Smart money believes gold, silver, platinuim and diamonds is going higher:

CNBC: Where to Invest in Times of Distress?
http://www.cnbc.com/id/15840232?video=1004555064&play=1


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## 33cl

PaddyBloggit said:


> 33cl ..... how do you buy gold? etc.


 
I used goldmoney.com where you can buy bullion (measured in what they call 'goldgrams') which is in turn apparently stored in secure vaults in London. It's very liquid aswell so turning it back into Euros is quick & easy if you want out. Re the storage fees they currently charge 0.302 'goldgrams'/month. so you are in essence gradually losing your gold amount but this is offset by the rise in the actual gold price. This is the 1 thing I dont like about their service but I'll put up with it so long as gold prices are on the rise in general. The current price per 'goldgram' I think is €21 so that's €7/month in fees. they also charged me a flat 3.3% 'deposit fee' or something on my purchase (no charge if I decide to sell). Check with them on this as it is a hefty enough fee and it may have gone up since I bought...amounted to about €1000 which was deducted from my total purchase.


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## UptheDeise

33cl said:


> I used goldmoney.com where you can buy bullion (measured in what they call 'goldgrams') which is in turn apparently stored in secure vaults in London. It's very liquid aswell so turning it back into Euros is quick & easy if you want out. Re the storage fees they currently charge 0.302 'goldgrams'/month. so you are in essence gradually losing your gold amount but this is offset by the rise in the actual gold price. This is the 1 thing I dont like about their service but I'll put up with it so long as gold prices are on the rise in general. The current price per 'goldgram' I think is €21 so that's €7/month in fees. they also charged me a flat 3.3% 'deposit fee' or something on my purchase (no charge if I decide to sell). Check with them on this as it is a hefty enough fee and it may have gone up since I bought...amounted to about €1000 which was deducted from my total purchase.


 

I don't think this is a good deal. What happens if Gold prices crashes? You'll lose some amount money if you ask me.


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## george.shaw

Gold unlikely to crash and surged today on first day of Obama Presidency - up some 3% and Dow Jones fell 4%:
METALS STOCKS Gold rises on worries recession will deepen
[SIZE=-1]MarketWatch - 1 hour ago
http://www.marketwatch.com/news/sto...1815-FB50-4E46-AD35-C56D9C99F435}&dist=msr_10[/SIZE]
[SIZE=-1][/SIZE] 
[SIZE=-1]Best to get real physical gold as per the advice of these smart gentlemen on CNBC:
Where to Invest in Times of Distress?
http://www.marketwatch.com/news/sto...1815-FB50-4E46-AD35-C56D9C99F435}&dist=msr_10[/SIZE]


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## george.shaw

Not sure what happened with hyperlinks:
http://www.marketwatch.com/news/sto...A1815-FB50-4E46-AD35-C56D9C99F435}&dist=msr_2


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## Chris

33cl said:


> Re the storage fees they currently charge 0.302 'goldgrams'/month.



Are you sure that's right. I have an account with www.goldmoney.com and the fees are minimum 0.1 goldgrams per month or 0.15% per annum, whichever is higher. So far I have found them very good to deal with, and opening an account was straightforward. 

I'm not in any way affiliated to goldmoney, except for being a satisfied customer.


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## george.shaw

David McWilliams warns of potential hyperinflation in America and says that gold "is the only real hedge against hyperinflation" in the Irish Independent today.

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. 

Economic theory would suggest that after a period of hyperinflation, where all old US debts are wiped out and lenders to the America robbed, the dollar revalues as America reindustrialises under the green job agenda talked about by Obama. 
History could well look on the end of the first decade as not just a momentous era which produced the first black president, but as a period of dramatic economic change. The debt-fuelled boom of the Noughties, leading to a rapid deflation and failed banking bailouts at the end of the decade, giving way to hyperinflation, which ultimately cleaned up the US's balance sheet. Sounds fanciful? But then again, so, too, did a black president not so long ago.

http://www.independent.ie/opinion/c...eds-to-run-up-a-frightening-debt-1608220.html


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## fiatmoney

Micheal Maloney has an interesting book, Guide to investing in gold and silver, he reckons silver will outperform gold.


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## george.shaw

Yeah very good book - part of Rich Dad ... series and Robert Kiyosaki writes the foreward. Silver has much stronger fundamentals than gold. 

Is less refined investment silver in the world today than there is gold and yet silver is nearly one eightieth of the value of gold ($850 versus $11.30 ). Finfacts had a very good article on silver: http://www.finfacts.ie/irishfinancenews/article_10009952.shtml


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## fiatmoney

I have read a lot of O'Byrne articles on Gold.ie.  
Is gold.ie the only place you can get physical gold in Ireland?


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## george.shaw

Think so. Believe some of jewellers are beginning to sell gold coins and think can get some on ebay.


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## fiatmoney

If there is going to be such a rush on gold maybe I should become a gold dealer!!


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## george.shaw

lots of people selling on ebay now.


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## uncle_sam_ie

I've just sold 500 euro in prize bonds and put into silver coins off of e-bay. I thought what the hell, if I lose half or all of my money, so what.  But if the economy goes down the toilet and we have hyperinflation like they had in Germany in 1923,  I might just be able to pay off my house and or my credit card debt. Here is a great article on how Deflation creates hyperinflation. 
[broken link removed]
And here is an article on how the silver market is artificially kept low but, that its a house of cards that in the end will be a boon for people sitting on physical silver.
[broken link removed]


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## fiatmoney

Uncle sam ie

Did you have to pay vat on silver coins?


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## FlyFishing

I would advise against buying Gold. It has no 'real value' anymore and was just an old way of transporting a sum of money from a to b.

Certain u.s. equities are the way to go forward.


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## fiatmoney

FlyFishing,

I think your on the wrong end of this money cycle. Equities, real estate and even the dollor, pound and euro are on a sprial down. Gold is only asset holding it's own...


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## Chris

FlyFishing said:


> I would advise against buying Gold. It has no 'real value' anymore and was just an old way of transporting a sum of money from a to b.
> 
> Certain u.s. equities are the way to go forward.



I'm baffled! How do you reason that gold has no real value, and in the same post recommend equities? 
Of course gold has real value, being a precious metal commodity with high demand and very limited supply.


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## uncle_sam_ie

fiatmoney said:


> Uncle sam ie
> 
> Did you have to pay vat on silver coins?


No, I had a family member get them off ebay(Silver eagles) for me in the US. They were here last week and gave them to me. I did buy 5 Silver Maples off ebay from some guy in Dublin and didn't pay vat. If you get them in the US it's a lot cheaper.


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## FlyFishing

fiatmoney said:


> FlyFishing,
> 
> I think your on the wrong end of this money cycle. Equities, real estate and even the dollor, pound and euro are on a sprial down. Gold is only asset holding it's own...



Thats the brilliant thing about investing. One succeeds or fails based on their own analysis.

I believe certain equities ( u.s. non-financials small caps ) hit their bottom last november and are in for a rally. One of my stocks rose over 200% in december.

Real estate is on the spiral down. Agree. 

The dollar has increased in value which will hold for about 6 months.

Agree with the euro and sterling.

Gold is the worst asset to hold. If you wanted to hold gold, a year ago would have been the time to buy, not now. Remember equities recover before the recession ends. That will hammer the price of Gold.

Someone mentioned the demand for gold. The demand comes from other speculators. It does not perform any major functions unlike say copper or nickel.

Just my opinion.


[broken link removed]


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## george.shaw

An investment strategy that focuses solely on US small cap equities is extremely high risk and is speculating. 

Physical gold bullion is not about speculation at all rather about being properly diversified and owning a monetary safe haven currency. 
Check out what the IMF has to say:  http://www.imf.org/external/np/exr/facts/gold.htm 

Probably best to have both asset classes in the portfolio especially if David McWilliams warnings prove prescient once again:
Could Obama be remembered as the man who presided over the greatest hyperinflation ever?
http://www.independent.ie/opinion/c...eds-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."

Don't put all your eggs in any basket ! - be that US equities (small cap or any other ) or all in gold. 

Diversify !


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## Askar

A lot of fuzzy thinking here. Presumably, for Irish investor, the 'hedge' is against hyperinflation in Irish economy. 

Assuming that US is so stupid and inept in managing its economy that it will continue to print money when current deflationary process reverses, how does threat of hyperinflation in US translate into hyperinflation in Irish economy? What measures are the ECB undertaking that will inevitably result in hyperinflation for our economy? What reason have you to believe that the average european consumer (who is more of a saver) will suddenly start behaving like the average US consumer (a profligate spender)?

Following logic of previous posters US hyperinflation would mean that those US gold owners would sell gold to buy Euro, which in turn would mean that they could buy cheap US assets. Is this not the same thing as having equities or cash in different currencies?


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## Askar

Nice little summary of the Bull and Bear arguments on the Motley Fool: [broken link removed]


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## george.shaw

Askar is right - just because the US has hyperinflation does not mean that we will have hyperinflation in Ireland. Would mean that US economy would collapse and therefore a diversification in gold would be sensible.

If there is hyperinflation in the US and that does seem quite possible, it is likely that there would be hyperinflation in the UK and in all debtor nations with exposures to Wall Street and the City of London. Hopefully the euro would not be as effected due to the German Bundesbank hawks who are aware of the risk of hyperinflation due to their experience at the end of the Weimar Republic in the 1920’s. 

Thus, stagflation or virulent inflation may be more likely with the Euro and other currencies. Regardless, cheap money, irresponsible lending practices, trillions of dollars of derivatives, massive leverage, government profligacy of recent times and quantitative easing and massive money printing is likely to see all paper currencies fall vis-à-vis gold.


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## 33cl

UptheDeise said:


> I don't think this is a good deal. What happens if Gold prices crashes? You'll lose some amount money if you ask me.


 
Of course it could happen, but I just dont see it in the current climate.


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## 33cl

Chris said:


> Are you sure that's right. I have an account with www.goldmoney.com and the fees are minimum 0.1 goldgrams per month or 0.15% per annum, whichever is higher. So far I have found them very good to deal with, and opening an account was straightforward.
> 
> I'm not in any way affiliated to goldmoney, except for being a satisfied customer.


 
i'm being charged 0.3, i was on the 0.1 for about 16 months then got a mail last summer i think saying the fees were changing. I'll doublecheck with them. Still pleased overall though.


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## UptheDeise

This is probably going off the point but why are the Americans and British to name a few, trying to stimulate their respectective economies? This recession was years in the making. Since the 1990's and early 2000's successive American Presidents have put off this recession by spend, spend, spend economics.

What need's to do be done:

1. Stop spending and cut back on public spending
2. Enourage people to save and consume less. Stop borrowing and spending.
3. Become more productive and produce more phyiscal goods.

Printing money excessively is an economic model called *Muganomics*.


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## george.shaw

Some very smart, astute people are now warning of hyperinflation. 
David McWilliams warned of hyperinflation in Irish Independent last week  and said how gold was the best investment in hyperinflation and now Morgan Stanley research team are warning:
*
Hyperinflation is a possibility, say Morgan Stanley*
Morgan Stanley’s Joachim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary (our emphasis)…
*http://ftalphaville.ft.com/blog/2009/01/30/51876/hyperinflation-is-a-possibility-say-morgan-stanley/*


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## george.shaw

Very good recent tv interview with the respected Arthur Laffer (Laffer's curve) warning of the risks of hyperinflation on Fox news (of all places !!) which can be watched here:
http://www.youtube.com/watch?v=hfSDPY5rYZE


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## UptheDeise

Another good person to watch on Youtube is a Mr Peter Schiff.

http://ie.youtube.com/watch?v=2I0QN-FYkpw


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## bogle

Everybody (the dogs in the street) is talking about buying gold! Therefore is it not a time to avoid buying gold ? Very few people are talking about buying oil (black gold) now?


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## 33cl

bogle said:


> Everybody (the dogs in the street) is talking about buying gold! Therefore is it not a time to avoid buying gold ? Very few people are talking about buying oil now?


 

I think we've yet to reach the 'mania' stage with gold and according to Peter Schiff, who's been bang on target with predictions on the US economy, housing, etc, gold should reach $2000/oz in the near future. When you take inflation into account, the price still seems reasonably low compared to its peak in the early 80s (link below). Oil prices do appear to be stabilising, your right. It's been hovering around $40/barrel for WTIC this year, so probably not a bad play if you're into trading futures.

[broken link removed]


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## uncle_sam_ie

george.shaw said:


> Very good recent tv interview with the respected Arthur Laffer (Laffer's curve) warning of the risks of hyperinflation on Fox news (of all places !!) which can be watched here:
> http://www.youtube.com/watch?v=hfSDPY5rYZE


 This is a better Glen Beck clip. 
http://www.youtube.com/watch?v=dlHBYQrCnIk&feature=related


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## Askar

bogle said:


> Everybody (the dogs in the street) is talking about buying gold! Therefore is it not a time to avoid buying gold ? Very few people are talking about buying oil (black gold) now?


 

Excellent point. Posters promoting this investment on this site may well have their own agendas.


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## Askar

33cl said:


> I think we've yet to reach the 'mania' stage with gold and according to Peter Schiff, who's been bang on target with predictions on the US economy, housing, etc, gold should reach $2000/oz in the near future. When you take inflation into account, the price still seems reasonably low compared to its peak in the early 80s (link below). Oil prices do appear to be stabilising, your right. It's been hovering around $40/barrel for WTIC this year, so probably not a bad play if you're into trading futures.
> 
> [broken link removed]


 
And if it reaches $2200 it will have regained (in real terms) its recent all time high of 1981. Presumably most retailer investors would have been suckered into buying around that time. From 1981 to date it has not kept up with inflation. So maybe those who bought in 1981 can hope of breaking even soon on their investment. That is what you call a long term buy.


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## Armada

Eddie Hobbs on TV3's Ireland Am this morning advising people to invest in Gold.  Is that good or bad??


----------



## bogle

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


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## george.shaw

Yes sounds like a grand conspiracy of bullion dealers.  ;-)  
Not sure who is "promoting gold". Are the people who think stocks or property are good investments on other threads "promoting stocks" or "promoting property"?
Are Rabodirect "promoting deposits" when they post on threads re deposits?

Gold is only featured in the Irish media once in a blue moon as the vested interests don't sell it. Gold remains a fringe investment - when Bertie Ahern and taxi drivers starts telling you to buy gold as it is cheap it might be a good time to sell. Or when the Irish Times has a Precious Metals Supplement.

Think I might take Morgan Stanley's advice over Bertie: 
*Hyperinflation is a possibility, say Morgan Stanley* 
Kaminska, FT Alphaville
Morgan Stanley's Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary:
"* we believe that buying some insurance against the black swan event of high inflation or even hyperinflation makes sense and is relatively cheap currently."
[broken link removed]
*ps
If you had put 10% of your portfolio in gold at the top in 1980 (was only there for a few hours so were only  a handful of people and would have to have been very unlucky) and the rest in blue chip dividend paying stocks, bonds, property and equities then you would have done very well as 90% of their portfolio would have done well and you would have had some financial insurance as well.

Seems like some people EVEN NOW in the worst financial crisis since the Great Depression (and possibly worse) still don't get the crucial concept of DIVERSIFICATION and the entire point of not having all your eggs in any basket.

Would be funny if it was not so tragic.


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## Askar

george.shaw said:


> Yes sounds like a grand conspiracy of bullion dealers. ;-)
> Not sure who is "promoting gold". Are the people who think stocks or property are good investments on other threads "promoting stocks" or "promoting property"?
> Are Rabodirect "promoting deposits" when they post on threads re deposits?
> 
> Gold is only featured in the Irish media once in a blue moon as the vested interests don't sell it. Gold remains a fringe investment - when Bertie Ahern and taxi drivers starts telling you to buy gold as it is cheap it might be a good time to sell. Or when the Irish Times has a Precious Metals Supplement.
> 
> Think I might take Morgan Stanley's advice over Bertie:
> *Hyperinflation is a possibility, say Morgan Stanley*
> Kaminska, FT Alphaville
> Morgan Stanley's Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary:
> "* we believe that buying some insurance against the black swan event of high inflation or even hyperinflation makes sense and is relatively cheap currently."*
> *[broken link removed]*
> ps
> If you had put 10% of your portfolio in gold at the top in 1980 (was only there for a few hours so were only a handful of people and would have to have been very unlucky) and the rest in blue chip dividend paying stocks, bonds, property and equities then you would have done very well as 90% of their portfolio would have done well and you would have had some financial insurance as well.
> 
> Seems like some people EVEN NOW in the worst financial crisis since the Great Depression (and possibly worse) still don't get the crucial concept of DIVERSIFICATION and the entire point of not having all your eggs in any basket.
> 
> Would be funny if it was not so tragic.


 
Strange post. I was not aware that diversification meant having gold in a portfolio; and any portfolio that did not have gold was not diversified (which appears to be the corrollary of your penultimate paragraph).


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## george.shaw

Strange days indeed Askar. Most peculiar Mama.
 ;-)
Most risk averse investors and people who know anything about economic and monetary history would accept that gold is a defensive asset and that thus with growing fears of hyperinflation it might make sense to have some gold, along with other more defensive assets - cash- Swiss francs, Singapore dollars, short dated AAA rated government bonds etc. in a portfolio.

Clearly all our eggs were in the property and equities basket and might be good to have in a number of different asset classes (especially ones that are not correlated such as gold).

Rather than continually bashing gold (in a somewhat uninformed manner) and people who think it makes sense to diversify into gold can you give us your esteemed opinion as to what Irish people should do to protect themselves from the coming likely Depression?


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## Damian85

I think gold does make an excellent defensive tool and I feel it has a part to play in most portfolios.

There are plenty of indicators to suggest that people who stock up on gold now could really reap the benefits.

For defending purchasing power it is proven through out history to do so. For those looking for appreciation in the value, it could prove an excellent prudent investment.

However, I do have a few problems with gold which may be worth bearing in mind and debating;

1. You can't use other people's money to purchase gold (eg. using a mortgage from a bank like you can with property which would decrease your risk exposure and limits you to the benefits of owning fixed rate debt in an inflationary environment). I suppose you could use leveraging, but there are too many unfavourable terms.

2. Gold doesn't produce regular income in the form of dividends or rental payments. Therefore, the investor is relying on appreciation. While very likely to happen, there are no sure things (except death and taxes!!).

3. Storage of gold could make you vulnerable to counter party risk. While you may own the gold, it is likely you will need someone to store it for you, especially if you own large quantities. There is the risk of counterparty risk, as well as the storage fees.

4. In times of high inflation and downturns, authorities may confiscate the gold from citizens for 'the good of the nation' like they did to American citizens in the 1930s, rendering it illegal and unpatriotic to own gold.

5. Gold doesn't entitle the owner to some of the tax breaks which other investments such as property can offer.


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## george.shaw

Very good, interesting, informative and highly pertinent article:
$3,000 Gold And Sagging Stocks
http://www.forbes.com/2009/01/30/fe...mic_outlook.html?feed=rss_business_healthcare
Gold should remain a key component of all investors' portfolios as the anti-dollar, anti-derivative, anti-LBO trade. At some point, sooner rather than later (i.e., within five years), gold will trade at $3,000 an ounce.


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## 33cl

Armada said:


> Eddie Hobbs on TV3's Ireland Am this morning advising people to invest in Gold. Is that good or bad??


 
Probably bad, but I see us as a tiny market anyway, so maybe when New York cabbies tell you gold is a sure thing, that's when you get out. Or even better, when Maria Bartaromo of CNBC says gold is going to the moon (as she did with the Nasdaq in early 2000), it's definetly time to run for the hills.

The guy who said gold buyers on this thread have hidden agendas...ffs man, we're trying to give people some useful info and opinions, you can take it or leave it


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## FlyFishing

george.shaw said:


> Very good, interesting, informative and highly pertinent article:
> $3,000 Gold And Sagging Stocks
> http://www.forbes.com/2009/01/30/fe...mic_outlook.html?feed=rss_business_healthcare
> Gold should remain a key component of all investors' portfolios as the anti-dollar, anti-derivative, anti-LBO trade. At some point, sooner rather than later (i.e., within five years), gold will trade at $3,000 an ounce.


----------



## Carramore

Reading this thread, I get the feeling that a number of contributors are trying to hype gold.  The problem with gold, as I see it, is that it's very difficult if not impossible to determine what's a "fair" price for it.  At least with an equity, I know that I will get a dividend of X% per annum on my money.  If X is more than the rate of interest on deposits (e.g. dividend yield of 7% v deposit interest rate of 4%), then I've to judge whether the dividend can be maintained or increased.  In the above example, if I think the dividend can be maintained, then it's worth giving serious consideration to the equity investment.  I don't know of how you can make a corresponding calculation for gold.  In fact, the opposite seems to be the case:  if you buy gold, you don't earn any income on it but you have to pay for the cost of storing it (or insuring it if you keep it at home).


----------



## Chris

Carramore said:


> Reading this thread, I get the feeling that a number of contributors are trying to hype gold.  The problem with gold, as I see it, is that it's very difficult if not impossible to determine what's a "fair" price for it.  At least with an equity, I know that I will get a dividend of X% per annum on my money.  If X is more than the rate of interest on deposits (e.g. dividend yield of 7% v deposit interest rate of 4%), then I've to judge whether the dividend can be maintained or increased.  In the above example, if I think the dividend can be maintained, then it's worth giving serious consideration to the equity investment.  I don't know of how you can make a corresponding calculation for gold.  In fact, the opposite seems to be the case:  if you buy gold, you don't earn any income on it but you have to pay for the cost of storing it (or insuring it if you keep it at home).



You seem to be basing your investment decision purely on dividends, and not factoring in any possible capital gain/loss. This would have led you to invest in bank shares 24+ months ago, when dividends were steadily rising; but now, most banks have pretty much frozen dividend payments.

There are also plenty of companies that do not pay any dividends at all, but rather reinvest all profits in the company. Using your argument, it would be impossible to value those company stocks. Every investor should be using some way of putting a value to whatever he/she is investing in. But basing investment decisions purely on the dividend payments is pretty risky business, in my opinion.


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## george.shaw

well said Chris.

those that owned "blue chip" Irish stocks and particularly bank stocks have seen their principle (entire value of their investment) drop by more than 80% in many cases.

dividends of 1% to 10% are not worth that much to you if your shares have fallen by 80%.

investing should never be about whither or not my asset class is better than yours but about real prudent asset allocation amongst a range of asset classes and real DIVERSIFICATION.

nobody is saying sell everything and buy gold - just that would be a good and sensible idea to have one asset class in a portfolio that is not correlated to equities, bonds and property.

are those who continually feel the need to bash gold some of the same people who told us Irish shares and property were not bubbles and not to "talk the economy down"?


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## Carramore

Hi George and Chris.  I agree that you should not base an investment decision on the basis of historic running dividend yield.  Note that I added the very important qualification of judging if the dividend can be maintained.   In relation to the point about companies that don't pay dividends, you can project their earnings over time, and allow for the eventual payment of dividends.  My core argument in the context of a discussion on gold as an investment was that you must have some objective benchmark against which to determine whether the current price represents good or bad value.  The fact that the price of a particular asset class went up by 10% or 20% in the last year, 6 months or whatever is irrelevant to whether it will fall or rise in future.  Some of the arguments now being advanced in favour of gold as an investment, on the basis of historic performance, are redolent of those advanced a few years ago in favour of property in Ireland.  Yet a review of fundamentals, in the form of comparing the cost of renting a property with the price of buying it, would have demonstrated that Irish property was a very bad buy at that time.  Gold may or may not be a good investment at the present time.  The problem is that I'm not aware of a benchmark against which to determine whether it is or not.

Warren Buffet once said that an investment decision should be made on the assumption that you will hold the stock/ commodity for ever.  If you hold gold for ever, all you'll have is a massive loss in the form of the cost of storing it.


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## Marc

If we define a "good investment" simply as something with the potential for growth - then the answer to this question is always going to be no, by definition.
Gold is finite and does not produce anything so why own it? 

In this respect Carramore is absolutely correct we need a benchmark against which to determine the benefit of holding gold in a portfolio.

Equities have a positive expected return over time because of the underlying growth associated with capitalism. An investment in equities allows you to share directly in this growth over time. However, an investment in equities is risky and is often associated with periods of steep declines.

A high degree of volatility in a portfolio does not always produce the highest return and many investors would be better off with a more steady return over time. This is achieved by investing in a wide range of different assets to reduce the wide swings in value in the portfolio or diversification.

The process of diversification in investment terms is the closest thing to a "free lunch" that investors have.

Gold pays no interest or dividend so why buy it?

In my view the reason to hold gold in a portfolio is more about what it isn't than about what it is. For a start it isn't someone else's liability, it isn't a financial instrument a bond,debenture, stock certificate etc - it is a finite physical entity and governments cannot simply "print" more of it.

The value is therefore purely a factor of supply and demand. Nothing more, nothing less. In every case, for me to make a profit, someone else has to pay more for my gold. 

The issue is therefore, what would cause the price of gold to rise and therefore for me to make a profit? The answer, historically, has been a loss of faith in other assets perhaps arising from high inflation, political risk, war etc.

I actually don't believe that an investor needs to even consider the current price of gold in this decision process. Since in my view the decision to own gold isn't about speculation around the future price of gold. I know I can't predict the price, but I can predict the effects of ownership. The current price I pay is irrelevant to the decision to own gold - it is the reason that I purchase that matters and that reason is the opposite of speculation.

The opposite of speculation is hedging and it is for this reason that a prudent investor would own gold in their portfolio.

Gold is shown to consistently have a very weak or negative correlation with other assets. In other words, if the price of gold is going up, you can be pretty sure that it is because the price of your other assets is going down. In other words sellers of assets such as equities have to put the proceeds of the sale somewhere, and often, they turn to gold at times of financial stress.

Equally, the price of gold is volatile - actually since 1971 it has been about as volatile as equities with an annual standard deviation (a measure of volatility and shorthand for risk) of about 20% roughly the same as Global Equities.

This is great news! In order to benefit from diversification I need something that reacts. If equities are going down fast, I need something that will make a difference in my portfolio. It is no good attempting to offset a 20% or 30% drop in equities with a 1% or 2% increase in something else.

Gold is therefore a form of insurance within a portfolio. As an investor I want to hold equities because they offer the highest expected return over the long term. However, I also want to diversify my portfolio to reduce volatility. The last year has shown that diversifying my portfolio of equities around different countries has not reduced the losses - I need something else in my portfolio to offset the risk of holding equities in the really bad years.

How well does gold do this? By way of illustration, let's have a look at the last 12 months:

   Correlations in Euro Currency
  Monthly data 1/2008 – 12/2008

                                   ...........................MSCI   Europe Index MSCI   World Index FTSE   All Share MSCI   Emerging Markets MSCI   Pacific Ex Japan S&P   Global Property Index S&P   500 Gold   In Euro
             MSCI   Europe Index          .......1.0
          MSCI   World Index.........            0.956.....................                    1.0
          FTSE   All Share                .............0.910.....................                    0.943..............                  1.0
          MSCI   Emerging Markets.    0.933......................                   0.845..............                 0.824..................               1.0
          MSCI   Pacific Ex Japan...      0.953......................                    0.915..............                 0.901...................               0.965..................                         1.0
          S&P   Global Property Index.0.843...................                    0.834...............                 0.692...................              0.804..................                        0.803.........................                          1.0
          S&P   500......................                        0.824.....................                     0.947..............                0.865...................               0.641...................                        0.747.........................                        0.772.................                      1.0
          Gold   In Euro.................                  -0.567..................                    -0.617.............               -0.721...................-0.459.................                       -0.602........................                       -0.315................                    -0.58..........           1.0

A correlation figure of “1” means that the markets are moving hand-in-hand perfectly and there is no diversification benefit. Obviously an investment is perfectly correlated with itself. A Correlation figure of -1 means that there is no relationship at all between the investments and a very high degree of benefit is being achieved from diversification between the investments.

The table clearly shows that spreading equity investments around developed economies did not result in a particularly high degree of diversification last year. Results of 0.95 or 0.93 suggest a very high degree of correlation between developed markets. Even the S&P Global Property index was relatively highly correlated with developed equity markets over this period and would not have offered investors much of a safe haven.

  An investment in Gold by contrast exhibits a negative correlation with other investments suggesting a much greater diversification benefit for an investor during the difficult market conditions of 2008.

So as an investor who holds equities should permenantly hedge their position with an allocation to gold. By permenantly, I mean if you decide to hold 5% in gold, keep the allocation at 5% every year. 

An investor who followed this approach would have been selling equities and property in 2006 and 2007 and buying gold to keep the proportions in their portfolio constant. Not a bad strategy to have followed.........


----------



## Chris

Carramore said:


> Hi George and Chris.  I agree that you should not base an investment decision on the basis of historic running dividend yield.  Note that I added the very important qualification of judging if the dividend can be maintained.   In relation to the point about companies that don't pay dividends, you can project their earnings over time, and allow for the eventual payment of dividends.



You still seem to focus too much on dividends. There are companies that even in the current climate are able to maintain or increase their dividends. At the same time, these companies have seen their share value decrease by by more than 50% in the past 18 months.
As for companies possibly/eventually paying out dividends, again a very risky method to base an investment decision on. You quote Warren Buffett, he has stated many times that while he is in charge of Berkshire Hathaway, they will never pay a penny in dividends. Apple have stated similar, that doesn't make either of these companies, among numorous others, less or more dificult to evaluate for investment.




Carramore said:


> My core argument in the context of a discussion on gold as an investment was that you must have some objective benchmark against which to determine whether the current price represents good or bad value.  The fact that the price of a particular asset class went up by 10% or 20% in the last year, 6 months or whatever is irrelevant to whether it will fall or rise in future.  Some of the arguments now being advanced in favour of gold as an investment, on the basis of historic performance, are redolent of those advanced a few years ago in favour of property in Ireland.  Yet a review of fundamentals, in the form of comparing the cost of renting a property with the price of buying it, would have demonstrated that Irish property was a very bad buy at that time.



Couldn't agree more, past performance should not be taken as an indicator for future performance, whether your are looking to invest in property, gold, equities or lean hogs for that matter. As for buy to let, you hit the nail right on the head.



Carramore said:


> Gold may or may not be a good investment at the present time.  The problem is that I'm not aware of a benchmark against which to determine whether it is or not.



See Marc's comment on supply and demand. If the world were to be convinced that gold is 'useless' then demand would sink to near zero and so would the price of gold. Whether that will realistically happen is a question for the individual investor.


Bottom line is that you can look at gold as:
1) An investment as part of a diversified portfolio, but acceptiong it's volatility (NB: no one here has advised to invest only in gold)
2) A hedge (See Marc's post which gives an excellent description)
3) An insurance against high/hyper inflation, however likely or not (just like a life insurance policy it only has value in the worst case scenario)
All 3 have their merits and risk.

I'm not a gold bug, but I do own gold and have been adding more in recent months. Some posters on this site are stating that gold is now a bubble waiting to burst because it's constantly being advised as a good investment. While I agree that gold is quite likely in a bubble phase, I believe it is in the very early stages . Drawing comparison to past bubbles like .com and property, gold is getting nowhere near as much attention. When there are daily articles or precious metal supplements in papers, when radio and TV news quote the price of gold and interview metal commodity brokers on each show, and when the investment/business section of the local book shop stock books on 'how to get rich with gold', then you'll know that you are close to bursting point.


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## george.shaw

Very well said Chris and Marc.

Believe gold has gone from being massively undervalued to being slightly undervalued to fairly valued. Will have to reach inflation adjusted high of well over $2,000/oz before it is in early stages of bubble and then likely to rise to over $6,000/oz (gold rose 25 times in the 1970's and the conditions today are far more bullish for gold - 25 X $250 = $6,250/oz)

Then we will well and truly be in a bubble mania phase gold will be featured and discussed on the radio and tv news on daily basis (not every 6 months) and on the front pages of newspapers and financial/business magazines.  

Good article in FT yesterday:

Bullion sales hit record in rush to safety
http://www.ft.com/cms/s/0/359da604-f6d4-11dd-8a1f-0000779fd2ac.html


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## PMU

The whole argument on gold as a hedge against hyperinflation is a red herring.   If hyperinflation occurs central banks would most likely increase interest rates rapidly to choke out inflation. They did this in the past, with the Fed under Paul Volker increasing interest rates to 20%, which resulted in inflation falling from 14% to 3%.  So, as it worked in the past, it is most likely they would try it again.  Your best ‘hedge’ against hyperinflation is not gold but a ‘sound money’ man or woman in the ECB.   For someone with large precautionary savings (and no investment portfolio) who is worried about hyperinflation a better hedge might be to put, say, 5 - 10% of their savings in a broad developed market equity index tracker or ETF rather than in gold, as you would expect equity prices to rise in line with the inflationary increase in prices, and you would also get dividends.

  But if you have an investment portfolio, I’m still not convinced you should buy gold.  As Marc pointed out, it doesn’t pay dividends, and, IMHO, it’s not really a commodity, i.e. something in daily demand by industry.   Gold, it appears to me, is some sort of a quasi-currency that is not supervised by a central bank.  

  Marc’s rationale for gold buying is that it is non-correlated, but e.g. so are other asset classes that may also pay dividends.  Marc’s post shows the negative correlation of gold with three asset classes (i.e. global developed market equities; global property; and emerging market equities). I would say you could achieve the same hedging with greater upside potential by investing in other asset classes, e.g. commodities, timber, foreign government debt. Here, e.g. is the relative price movement of non-euro denominated short-term government debt vs euro-denominated developed market equity: http://uk.finance.yahoo.com/q/bc?s=^STOXX50E&t=2y&l=on&z=m&q=l&c=ibts.l 

  which looks reasonably non-correlated to me.  [Note: this is not a recommendation to buy non-euro government debt at this point in time.] You don’t have to have perfect non-correlation; every < 1 correlation lowers portfolio volatility.

  I would think that Marc’s suggestion that an investor who holds equities should permanently hedge their position with an allocation to gold requires further scrutiny. .If you do this you are in effect making a bet that gold will always revert to its mean, and I think it would be prudent to see some evidence of this before adding gold to your portfolio. Also, if you rebalance towards gold when it is down you would be diverting dividend income or new investment into gold, i.e. into something that does not pay dividends and for which demand is largely discretionary (i.e. for jewellery).  You would be better off rebalancing into a ‘proper’ asset class.


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## Askar

Good points PMU. 

I presume this is why Buffett was 100% in bonds up until recently (following on from Marcs earlier reasoning as to why one would be selling off equities in 2006/7).


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## Chris

Askar said:


> Good points PMU.
> 
> I presume this is why Buffett was 100% in bonds up until recently (following on from Marcs earlier reasoning as to why one would be selling off equities in 2006/7).



Buffett was 99% in equities, Berkshire Hathaway, and 1% in bonds. The 1% he held in bonds he has reportedly redirected into US non-Berkshire equities.


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## george.shaw

Sorry - PMU but you obviously do not know what hyperinflation is. 
I suggest you read up on it here: http://en.wikipedia.org/wiki/Hyperinflation .

In hyperinflation, a countries economic system and currency literally collapses. 
The majority of companies go to the wall (except for companies that are politcally connected and or produce and sell necessities - natural resource, energy, food, basic commodities). 

Fiat paper money has no instrinsic value whatsoever and every paper currency in the history of man has eventually collapsed leading to hyperinflation.

Thus the argument of equities good v gold bad is simplistic and silly. 
Both are essential in a properly diversified portfolio.

Re Volker and the 1970's - that was in stagflation which is an altogether different beast than hyperinflation for a start as per above. Secondly, if central banks drastically increase interest rates, investors will be incentivised to own government bonds and cds. As happened in 1980. 

But crucially, gold is correlated with rising interest rates. This was clearly seen in the 1970's - interest rates rose throughout the 1970's as did gold and it was only at the end of the tightening process when interest rates were at near double digit levels that investors and savers sold some of their gold investments and reallocated to government bonds and cds.

Of most importance is the salient fact that the US was the greatest creditor nation the world had ever seen in 1980. Today it is the greatest debtor nation with an insolvent banking and financial system (according to FT's Martin Wolf yesterday).

Moody's are considering downgrading US government debt and the Chinese are getting nervous and openly warning of diversifying into euros, yen and gold.

Diversify !


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## ringledman

*http://www.moneyweek.com/investments/precious-metals-and-gems/whats-the-point-of-gold-14619.aspx*

*What's the point of gold? *

By Adrian Ash Feb 13, 2009 

"The twilight of gold appeared to have arrived," wrote Niall Ferguson – now a Harvard professor, then an Oxford scholar – of the metal's 20-year bear market at the end of the last century.
"Gold has a future of course," he added, "but mainly as jewellery." And it's a common enough long-term view, repeated every so often by economists, historians, columnists and analysts.
"The stuff has a historical place in the money market," as one New Zealand advisor put it in a note to her clients in 2003. "But gold's just that – historical." So historical, in fact, it deserves to be scorned – along with human sacrifice, living in mud huts and VHS tapes – as primitive, brutish, uncivilised.

"Was it not I," asked John Maynard Keynes in 1945, "who wrote that 'Gold is a barbarous relic'...?"

Man of the moment once more today, Keynes was hardly first to disdain the metal as money, however – even if he was part of the Bretton Woods' team which replaced it with US dollars. Printed at will, the dollar would prove so much more flexible, more available than tightly-supplied gold. Amid the Great Depression of the late 1920s and '30s, Keynes called for Great Britain and then the rest of the world to stop redeeming its paper notes for gold coins or bullion. The supply of money and credit could then start flowing freely once more, boosting demand for goods and services and sparking an inflation in prices that would make the value of outstanding debts evaporate. 

Yet the scheme was nothing new. More than two centuries earlier, John Law – another visionary economist – had proposed and attempted the very same thing.

A world-famous gambler, convicted murderer and exiled Scot, Law gave the world its first modern bubble and bust. His grand system – first proposed in his book, _Money & Trade Considered_ (1705) – sought to revoke state bankruptcy by replacing gold money with arable land, paper notes, stock-market shares, future tax revenues, the Mississippi Delta... anything but more metal.

"It is in the interests of the King and his people to guarantee bank money and to abolish gold specie," wrote Law as he applied his theory to France's very real financial crisis. Giving monetary power to, say, the stock of his Mississippi trading company, would "diminish the value of gold by taking away its usage as money."

But those dumb Frenchmen! Whenever they took profits by selling Mississippi stock as it doubled, trebled and rose ten-fold, they "thought they might turn it into heaps of gold and silver, which they call realising," spat Law.

Couldn't they see?

"The lands of France are worth more than all the gold which still lies hid in the mines of Peru," Law declared. "The stocks [of his Mississippi venture] actually surpassed in value all the gold and silver which will ever be in the kingdom."

Yet still the French crowded out of his stock and into gold as the bubble burst in 1720. Come May, John Law banned the use of monetary metal altogether on pain of fines, imprisonment and even death – stealing a march on US president F.D.Roosevelt by some 213 years.
Make no mistake; Law would have been right to price Mississippi stock far above money...if only his Compagnie de l'Occident had held any real value at all. Instead, it owned a million miles of disease-ridden swamp, plus a sick colony of ex-beggars and thieves lost in Louisiana. Whereas gold offered then just what it offers today: very little of productive value, but a time-honored bolt hole when nothing else pays.

Gold's only value, you see, comes in owning it – whether for adornment, to escape the risk of counter-party default, or as a defence from inflation. Any other class of financial asset, provided it offers a yield, income or growth, should win out over gold. Just so long as it keeps delivering that yield, income or growth. Because gold, a raw lump of metal, will pay nothing and do nothing besides holding its value across the very longest of long terms.

How long is the long term? "It is said that an ounce of gold bought 350 loaves of bread in the time of Nebuchadnezzar, king of Babylon, who died in 562 BC," wrote Stephen Harmston – then an economist at Bannock Consulting – for the World Gold Council (WGC), just when Niall Ferguson was condemning gold as mere frippery ten years ago.
"The same ounce of gold," Harmston went on in his study, _Gold as a Store of Value_, "still buys approximately 350 loaves of bread today." Which seems an odd swap to us, unless you're very hungry indeed. But "across 2,500 years, gold has in other words retained its purchasing power, relative to bread at least."

Crucially for long-term investors – especially for those with 2,500 years to wait – "Gold has had a real rate of return of zero," as Harmston observed. Meaning it doesn't beat or lag inflation or deflation. Not across the very long run, that period in which "we're all dead" as John Maynard Keynes, himself now very dead for six decades, once said.
To get this straight, it bears repeating. Gold is NOT the ultimate inflation hedge, not compared with dividend-paying, growth-dependent stock investments. Not unless you keep your entire savings tied up in Gold Bullion, hedging your very existence against a loss (or gain) in the value of money. And not unless you get to exist for an awfully long time to come as well.

Across the slightly-less long run – say, a mere one-and-a-half centuries, rather than two-and-a-half millennia – the inflation-adjusted value of gold remains well below where it started on average.
The value placed on gold when the Bank of England set the international Gold Standard in motion in 1844 has rarely been seen since. And on the historical it's in fact slipped by 15%, slowly declining before turning decisively lower throughout the 20th century.

Why would the world (the best proxy for which, we guess at BullionVault, is the well-attested British experience) put progressively less value on gold amid the murder and mayhem... bubbles and busts... of the last 100 years? Why did gold lose purchasing power – and then continue to lose value – both during and then for a long while after total war swept Europe, Africa, Asia and the Pacific? Surely such death and destruction should force gold to a premium?

The fact is, however, that the 20th century also brought fresh competitors for investment wealth...competitors rapidly offered to every class of investor as the Second World War receded and then the "Big Bang" of deregulation began under the Thatcher and Reagan administrations.

Yes, it may seem heretical (if not blindingly obvious, depending on where you start), but like charcoal and shire horses, steam trains and gas lamps, the 20th century subjected gold to a sharp loss of relative utility and thus value. Gold's only use comes in its ownership, remember; so its value as a store of wealth necessarily depends on the supply of alternative holdings. And the 20th century brought a flood of competition for that role.
The upshot today, almost a decade after Gordon Brown's infamous gold sales marked not only the high-point of anti-gold sentiment but also the very nadir of its 20-year slump. Free from default risk and inflating supply, gold suddenly looks very attractive to fund managers, investment advisors and private individuals who only a few years ago mocked the idea that metal might be worth owning.

Sure, the time may soon come when gold's one single use is matched and bettered again, beaten by other, more productive investments. But until then – and as gold's current price action suggests – what else will you hold as stock earnings tumble, bonds are over-supplied and threaten default, and the value of money itself is forced ever-deeper into genuine crisis?
• _This article was written by Adrian Ash, editor of Gold News and head of research at BullionVault._


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## manaboutdog

I've been following this thread for a few months, I don't profess to know a lot about financial markets or investments at all, all my assets are in cash in deposit accounts, I've never dabbled in the stock market aside from some company stock options that were quickly sold.

I have fears that hyperinflation may indeed become a reality affecting both the dollar and euro and am considering diversifying into either property or other precious metals. I've been doing a fair bit of research on this particular type of investment and to my simplistic view I see silver as being a more attractive home for my money. Purely because it's price is not just dependent on the fact that in order to sell it, I need to find somebody who thinks it looks pretty. It has industrial uses which would insure that it would maintain 'some' value, in the event of cash becoming worthless.

My main question/worry about gold is what reason do people have for having confidence in it through thick and thin. Other than the argument that it has been used for trade since shep was a pup. It's all dependent on people's opinion's of it. Nobody actually _needs _it for anything.


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## Damian85

manaboutdog said:


> My main question/worry about gold is what reason do people have for having confidence in it through thick and thin. Other than the argument that it has been used for trade since shep was a pup. It's all dependent on people's opinion's of it. Nobody actually _needs _it for anything.


 
I would ask what *need* have we in paper money? The answer is none. It is perception that gives it value. Paper money is a medium of exchange. A medium of exchange must be efficient and accepted by users. 

I think from reading through these posts, three conclusions are strongly evident from many posters;
1) Hyperinflation is becoming a more viable threat
2) Gold has served as an efficient medium of exchange far longer than fiat money
3) Gold rises with the inflationary tide of assets denominated in fiat money

That is why I feel people have confidence in gold through thick and thin.


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## manaboutdog

Damian85 said:


> I would ask what *need* have we in paper money? The answer is none. It is perception that gives it value. Paper money is a medium of exchange. A medium of exchange must be efficient and accepted by users.
> 
> I think from reading through these posts, three conclusions are strongly evident from many posters;
> 1) Hyperinflation is becoming a more viable threat
> 2) Gold has served as an efficient medium of exchange far longer than fiat money
> 3) Gold rises with the inflationary tide of assets denominated in fiat money
> 
> That is why I feel people have confidence in gold through thick and thin.


 
You've actually just reinforced my point rather than answered the question. I'm really trying to understand exactly how Gold differs from any other form of currency?

What happens if the doomsday scenarion does arrive? Why are people so confident that gold will be accepted in return for a service or goods?

The point that it has been done and accepted in the past is irrelevant IMO as you could point to this in the case of any form of currency until it collapses. I just don't see any intrinsic value in Gold to prevent it from collapsing also?


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## Askar

How is the threat of hyperinflation materiliasing for Ireland? The stimulus package in the US is far greater than Eurozone equivalent, is it not? We are currently experiencing deflation, so how is this suddenly going to be reversed? Why would hyperinflation in the US translate into something similar in EU?


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## chewchew

Are there any brick and mortor financial institutions in Ireland that sell gold (I'm not interested in storing the gold myself so not a jewelers or something).

I am unsure about buying gold from a website like gold.ie or bullionvault.com, who regulates them? What guarantees do you get?


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## AmIok

You want to buy Gold but not store it?  Buy into a Gold fund of some description that is regulated


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## Damian85

manaboutdog said:


> What happens if the doomsday scenarion does arrive? Why are people so confident that gold will be accepted in return for a service or goods?
> 
> The point that it has been done and accepted in the past is irrelevant IMO as you could point to this in the case of any form of currency until it collapses. I just don't see any intrinsic value in Gold to prevent it from collapsing also?


 
I believe gold won't collapse for a number of reasons. Its acceptance in the past is not irrelevant as this acceptance reinforces its' acceptance into the future. Gold is scarce, durable, and internationally accepted. Counterfeiting is not a problem also. If fiat currencies are to collapse, and if gold was to follow suit, what could we use as a medium of exchange? Truth is there are very few other metals which could be used as an efficient medium of exchange. 

If a doomsday scenerio was to occur, and fiat currencies were to collapse, gold, given today's technology, could prove a far more efficient medium of exchange that it did so in the past. Users wouldn't neccessarily have to carry blocks of gold around with them. Credit cards and debit cards denominated in gold ounces could be used to pay for goods and services. Indivisibilty would not be a problem.


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## chewchew

AmIok said:


> You want to buy Gold but not store it?  Buy into a Gold fund of some description that is regulated



Where can I buy into a gold fund? As I said I have seen websites like gold.ie and bullionvault, but I would feel more comfortable dealing with a regulated brick and mortor financial institution.


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## ringledman

chewchew said:


> but I would feel more comfortable dealing with a regulated brick and mortor financial institution.


 

If you can find one of these in today's world please let us know!

If your not comfortable with the likes of bullionvault I would recommend buying coins direct and take the chance that they never get lost or stolen... And be willing to pay a substancial premium on their purchase. 

I personally am quite happy to buy through bullionvault and know the stuff is in a highly secure vault in London.


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## whitegrass

http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article5740620.ece

an interesting article adding to the debate.


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## george.shaw

Errrrm    . . .    got to love the confidence in “bricks and mortar financial institutions”     . . .   would Anglo Irish Bank be one of them and aren’t these the same institutions that got us into this mess ?   . . .    and weren’t these bricks and mortars institutions regulated !?

Think best to own and possess ( ‘possession is 9/10’s of the law’    ;-)   )  the bullion in one’s hand but if going to store with a third party best to store it with the  ‘regulated’ Western Australian government mint – the Perth Mint has a real AAA sovereign credit rating which is not about to be downgraded and they are in existence since 1899.

Unlike bullionvault.com and digital gold, Gold Investments in Fitzwilliam Square are regulated fee based investment advisors who are EU approved dealers for the Perth Mint.

Does not come much more regulated bricks and mortar than the government Perth Mint – www.perthmint.com.au 

Times' Rees Mogg article is very interesting. 
Thanks Whitegrass.


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## george.shaw

Apropos of investing in gold in regulated bricks and mortars financial institutions, see the Perth Mint has doubled it's bullion holding in the last year to over $2 billion:

US Investors Boost *Perth Mint* Gold Holdings on Risk[SIZE=-1] , Bloomberg
http://www.bloomberg.com/apps/news?pid=20601103&sid=a40hCHULNK6c&refer=us[/SIZE]


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## Pennyscraper

Flyfishing, I'm not sure that you're reading the right charts. Anyone who tracked gold down to October levels would be making a serious killing now. Anyone who tracks its possible slip after the momentary touchpoint of 1002 on friday could stand to make a lot more as it ramps up.

Gold having no value? That's so extreme as to be a purposefully provocative remark.


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## bogle

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...
[broken link removed]


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## george.shaw

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!
;-)


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## PMU

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?


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## george.shaw

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.


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## joe sod

"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


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## ringledman

bogle said:


> 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...
> [broken link removed]


 

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_


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## joe sod

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


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## george.shaw

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
[broken link removed]= 

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.


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## george.shaw

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.


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## cancan

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.


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## North Star

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


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## ringledman

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!!!


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## bogle

ringledman said:


> ...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


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## george.shaw

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; " - [broken link removed] ) 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


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## ringledman

bogle said:


> Any chance of the Euro-millions lotto numbers when you're at it


 
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.


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## george.shaw

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


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## 33cl

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.


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## george.shaw

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.


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## cancan

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.


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## george.shaw

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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## cancan

a) Why are you comparing gold to equities - they are not comparable investments.

b) I was making the point that gold investing carries a 2 independent risks, currency and asset.

c) When are you going to stop sounding like an estate agent re: 2006 with respect to gold?

You are deliberately and continually trying to make the possible downside to gold unclear to viewers of this form.

Try adding some balance to your posts.

People who are looking for somewhere safe to park money should be aware of both the potential upside and downside.

It is no safe haven, and you'd be mad to think otherwise.


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## george.shaw

Lol !

Talk about unbalanced Cancan - "it is no safe haven, and you'd be mad to think otherwise."

This is factually inaccurate as gold was safe haven in the 1930's and in the late 1970's and again since 2007, 2008 when it rose in all currencies including the dollar.

u said that gold has currency risk. 

but all fiat currencies and all assets (denominated in fiat currencies) increasingly have currency risk as the printing presses are being used to bailout banks and buy dodgy assets and toxic debt. This has seen all currencies including sterling and the euro falling sharply versus the dollar and gold.

Gold is an investment as is equities and fair to compare any and all investments to each other. obviously stockbrokers and others who sell equity based products are not comfortable with this comparison.

errrr  . . .    don't remember any estate agents saying "DIVERSIFY" or do not put all your eggs in property.

let me clarify  . . .  do not put all your eggs in any basket including gold but do be diversified and have an allocation to gold to protect against unprecedented macroeconomic and systemic risk and Buffett's warning of the coming "onslaught of inflation."

fish and bicycles can peacefully coexist !
;-)

DIVERSIFY


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## Happy Girl

I have been following this thread with great interest and was/am considering buying some gold. However as the thread expands I am getting more and more confused as to whether gold is a safe haven for my funds. Basically like the vast majority of people I am not confident that the Government could live up to its Deposit Guarantee Scheme if push comes to shove. What other hedges (medium risk) are available to ordinary joe soap to preserve his/her few bob savings in the event of "armageddon".


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## cancan

You are touting $2000 gold, and using "safe haven" to give the impression that this is risk free.

As can be seen by Happy Girls post, you are (possibly unintentionally) giving the impression throughout this thread that there are no downsides.

Either you don't understand the risks involved fully yet, or do, and are happy for others not to.

I have no problem with people of different opinions. But I think when the OP asks a serious question about whether something is a good investment, you should present both sides of the story as best you can.

People should be aware that the price can go either way. If it was a guaranteed win, the price would already be there. The market isn't stupid.


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## george.shaw

You appear to have issues dealing with the facts that I have pointed out to you as can be clearly seen above.

Secondly, u gave the impression in your previous post that Irish people who had invested in gold with euros had lost even more than  those who had invested in dollars ("Double whammy of currency risk and asset risk for euro investors..."). 

This is factually incorrect as the euro, (like sterling but not by as much) has fallen sharply against the dollar and gold resulting in euro gold prices being up 15% since the start of 2008 (ISEQ is down 15%).

I sincerely believe that gold will at least reach it's inflation adjusted high of $2,400/oz as per the Economist chart seen on the previous page. That is not touting just my sincerely held belief. Assets become bubbles when they reach their inflation adjusted high and gold is less than half it's inflation adjusted high today - $915/oz.

I also sincerely believe that gold is a safe haven currency. 

And 5000 years of history would corroborate this. Every single paper currency since the dawn of time has collapsed in a hyperinflationary collapse and unfortunately I fear that this may happen again in the coming years as warned of by David McWilliams recently.

Rereading this thread it is interesting that those who continually bash gold rarely offer alternatives and often are incorrect in their assertions and sometimes factually incorrect.

A little knowledge is a dangerous thing.

You keep selling gold Cancan and I will keep buying it and in 5 years time lets see who is correct. 

Gold is a safe haven otherwise the People's Bank of China and other central banks internationally would not be selling their huge dollar reserves and buying gold:
*Major economies eye boost to gold reserves *
*Reuters via The Guardian *

Diversify and own some gold Cancan  (if even only a small amount)- tell your friends and family to do the same.

I genuinely and sincerely believe that your closed mindedness and obvious bias may cause you much financial pain in the coming years .

Happy Girl - you should do the same. Own some gold in order to protect yourself but do not put all your eggs in gold (or in equities, property, bonds or cash).

Now more than ever a really diversified balanced asset allocation is essential.

DIVERSIFY


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## cancan

Whatever you say George. Reading comprehension seems to be lacking somewhere along the chain.

I am only trying to highlight that there are risks involved beyond what you are willing to admit before people get burnt/rich.

I don't have a side, but you should not present it like it's christmas and your birthday rolled into one.

People can do their own research after that and make their own minds up - Invest away, but be aware, there are risks, possibly bigger than this thread demonstrates.

There are other more in depth resources available for people to determine those risks themselves. Due diligence and all that.

2 years ago, people bought houses based off opinions on this site.

Last year people bought bank shares based off opinions on this site.

This year...............People should think for themselves more.

If one does not understand what they are investing in, they should not invest. Many have been given a free education in the past couple of years in that.

People like to think that it was genius when they are right, and someone else’s fault when they are wrong.

Personally, I am not against gold as an investment. I just want people to be aware that it's a bit more complex that a few positive links of the web, and that while there may be a plus side, there may also be a downside. Happy investing to all.


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## george.shaw

Couldn't agree more Cancan with all you said there.

Under no circumstances should anyone make an investment based on their readings of Ask About Money or any forum or any one thread.

My issue with you was with regard to factual inaccuracies and sweeping statements of fact and generalisations.

I agree that everybody should do their own due dilligence and read far and wide, in order to know and understand the gold market.

Great resources in this regard are [broken link removed] , www.goldassets.co.uk and www.goldseek.com which all have a lot of the breaking news and comentary regarding the precious metals market (positive and negative but more positive at moment because the supply demand driving the market are very sound).

People should listen to and read what the people who predicted this economic debacle are now saying (and ignore the vested interests and commission driven product sellers). These people are Eddie Hobbs, Jill Kerby, George Lee and David McWilliams in Ireland and Jim Rogers, Max Kieser, Nouriel Roubini, Marc Faber, Peter Schiff and Bill Bonner internationally. Buy their books and read them in Google News and on You Tube.

Most believe that gold will rise (some think gold might fall if deflation creates a greater Depression but if gold does it will fall a lot less then other assets).

 Educate yourself.

Risk comes from not knowing what you doing but believing that you do.

We are living in absolutely unprecedented financial and economic times.

Good quote by Lord Rees Mogg, economist & former editor of The Times & assistant editor of The Sunday Times is very appropriate today 

"Governments lie; bankers lie; even auditors sometimes lie: gold tells the truth."


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## rgfuller

Short article on gold prices (in dollars) on yahoo today.
[broken link removed]
It's a shame it only discusses the trends over the last 200 days only, and doesn't translate the trends into the euro.


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## george.shaw

The Telegraph has created a Gold section in the Personal Finance section of its website:

Gold

Gold is investors' traditional safe haven in times of financal turmoil. Read the latest news stories concerning the metal, as well as comment and analysis.
[broken link removed]


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## Cweston

I really take exception to the post from george.shaw as it is an inaccurate summary of what I said on Newstalk on March 3. I was not negative on gold but tried to present the for and against arguments on gold. I mentioned that gold has risen for 11 months consecutively, that it is near $1,000 an ounce, but I also said it was seen as a store of value in times of uncertainity and people were buying it up. I mentioned that it was an important component of a balanced portfolio. Far from dishing gold, I was attempting to give both sides.

As for ignoring gold in the columns of the Irish Independent, that is an inaccurate and unfair comment on me also. I commissioned and published a 1,000-word article on gold which was published in the Your Money pages just two weeks ago. 

And I do not own any gold.

Why is george.shaw so determinedly biased when it comes to gold? 

Charlie Weston
The Irish Independent


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## george.shaw

Hi Charlie,

Re read my post and realise was a bit harsh Charlie.

Unfair to personally single you out for criticism in this way.

I am just frustrated as I genuinely believe gold will be one of the few investments to protect people in the coming years and feel that the Irish media rarely if ever covers gold and when they do it is often minsinformed and biased.

The Irish Times recently had an article where they repeated and highlighted 3 times (to paraphrase) that most analysts warn that gold may be overvalued and suffer a correction.

This is factually incorrect as most precious metal analysts are bullish on gold as per Reuters and Bloomberg polls. 

"Analysts" who are bearish on gold are the vested interests such as banks (selling equity based and other products) who have no expertise re gold whatsoever and who got us into this mess selling "product".

Most analysts from major banks are bullish as per this article in the FT:

"The head of sales at one bullion bank told the Financial Times that he had never been so busy dealing in gold for large investors.
Goldman Sachs, Morgan Stanley and UBS forecast that the gold price would rise above $1,000 this year.
Peter Munk, chairman of Barrick Gold, the largest bullion miner, told investors last week that all countries had embarked on policies that would favour gold.
"The only option to governments is to print and print more money," he said. "That will end in tears."
[broken link removed]

Apologies again Charlie.


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## smiley

Warren Buffett on cnbc yesterday: A question on gold.


I want to get to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?

BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.


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## george.shaw

Buffett is very smart but he is not all knowing or infallible and he is not God.

He bought into Goldman when it was over $100 and gold was under $750/oz. 
Today Goldman Sachs has broken down to below $75 and gold is at $914/oz.

Not too mention his ill timed foray into Irish bank shares.

He appears to have a serious blind spot here or he is talking his equities book.

Frightening that even now he does not get the concept of proper diversification.

The beauty of gold is that it has ZERO COUNTER PARTY RISK.

That is precisely why the Federal Reserve keeps over 8,000 tonnes of gold bullion in Fort Knox and the Federal Reserve in New York and have not sold any in recent years.

Central banks own gold as gold cannot go insolvent - unlike companies and banks. Indeed the global financial system is ruptured and close to collapse.

Also, politicians cannot debase gold through massive government spending, stimulus packages, bailouts and massive government deficits.

Meanwhile all the gold in the world can fit into a 20 metre cube on a tennis court. It is extremely, extremely rare unlike paper or digital currency.

The notion that gold is particularly speculative is ludicrous - especially in the current climate.

Central banks are rightly increasingly concerned about the prospects of financial, economic and systemic contagion. The German Bundesbank recently clearly stated how they view gold as an essential reserve currency and monetary asset. 

“National gold reserves have a confidence and stability-building function for the single currency in a monetary union,” the Bundesbank said.


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## smiley

Buffetts long term history speaks for itself. He is the most successful and richest person in the world.

You are nit picking short term blips that will have none or very little bearing on his long term investment success.


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## george.shaw

No one has a crystal ball Smiley.

But in the current climate if someone was to put a gun to my head and force me to chose Berkshire Hathaway shares or gold bullion I would choose gold bullion.

I do not blindly follow and believe the sentiments of anyone - even the Oracle himself.

Gold has an even longer term history than Warren B and it speaks for itself - has outperformed the S&P 500 and DJIA since 1971.

Actually think that Berkshire Hathaway shares and gold will both do very well in the coming years due to what Buffett has warned of in the "onslaught of inflation".

Diversification is key with a range of assets.

Fish and human beings can peacefully coexist.
;-)


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