Key Post Is gold a good investment?

JoeBallantin said:
It depends on who you ask. This thread is a good example of both viewpoints. I would say yes, gold is good buy... it can hardly be worse than depositing in zombie banks, or zombie currencies. (There are non-zombie currencies, and many would say the dollar is fine too, but I don't know what they could be basing that on, .. certainly not on US ability to repay))

Governments say that their currencies are sound, but are they?

Can the US ever pay back the 14 trillion? (China are owed a trillion, or approx 1,000 billion.. I wonder who is owed the rest?)

If the dollar or the Euro is to fail what will happen? Will the Euro be able to get out of the mess it's currently in?

Many people say that gold could hit 5,000 dollars an Ounce, from approx 1,250 today, or 300 a few years ago.


No-one can predict the future, so who knows. I just know that most currencies are devaluing. (The dollar has depreciated by 97% or so in the last 100 years.. this is why prices of houses etc rise... but have they risen when priced in ounces of gold?)


It's said that an Ounce of gold (value 1,000 Euros), could buy you three good suits in biblical times.. same as today. But the currency of ancient Iran or where-ever is likely worthless.

Every fiat currency in history has failed eventually. (With some potential exceptions perhaps)
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is it not clear from the smooth sale of portugeese , spanish and italian bonds last week plus the month long rally by the euro against the dollar that bearishness on the single currency was way over cooked
 
This is all very interesting. But I would maintain that gold of itself is a repositery of value, with little value in, and of itself. Historically if we went back further than it's use as a repositery, we would be talking about bartering of goods with actual real and neccessary value. ie I'll give u three sheep for your one cow. These things ( and in modern society) much much more are of inherent value. Stocks as ownership in a company that makes something others want and particularly things they need contains this real value. If I have the heart medication you need to live, I can ask any price in whatever form I demand, gold, €'s £'s etc, (all other things being equal) from you for it. Thus I would prefer to hold value in this form rather than in gold at present prices.
 
You would prefer to hold value by holding commodities that people need? like heart medicine, oil or oranges? or did you mean in stocks?


Farmerette says that the Euro has rallied against the dollar... this may not matter.. not if both currencies are screwed.. you might be comparing one load of rubbish against another load of rubbish.


I can't see the stock market doing too well if currencies collaspe,.. as many of these companies may have large cash reserves. Stocks can crash for other reasons...

The value of both gold and cash depends on perception.. but I feel that gold will never become worthless (besides massive changes in physics or space exploration), whereas cash could.

I accept that gold could drop in price, and may take decades to recover. But it could also double in price within three years. There has been no parabolic rise in the price of gold which would be indicitave of a bubble.


Silver too could be good... but I'd be waiting for the next correction before investing.
 
I mean stocks in productive & profitable companies. Preferably ones paying a good dividend. Gold (mostly) and definitely money in all it's forms are essentially non-productive. I think this problem is at the heart of the current crisis. Germany is rich because it makes things peope want to buy or equally serivces that people are willing 2 pay for. If they reverted to the mark, the mark would have a high value, but only because of German productivity. If we run with your scenario of currency collapse and its potential impact on stocks, one could also conclude that a gold devaluation would be just as likely, because gold has no inherent value. It would only have value inasmuch as ot could be traded for something else - food for example. In fact in a nightmare scenario food itself would probably be the new currency! (note to self to fill the bunker!).

Your right of course, that assets are held in currencies, and that some method of currency is neccessary for a functional society. I also fear quantative easing as an effective devaluation of a currency. The Wiemar republic springs immediately to mind.
But a reversion to a gold standard is not on the cards methinks, and for all the reasons you outlined in detail. On balance tho, I still feel gold is over-valued in the mid to long term, ie (next ten yrs). Though I know all this could change rapidly. Looking at events in Tunisia and the possibility of a contagion in other ME states could be the cataylst that comes out of left-field and throw all predictions out the window.... was it Chamberlain who said "events dear boy events"?
 
JoeBallantin said:
You would prefer to hold value by holding commodities that people need? like heart medicine, oil or oranges? or did you mean in stocks?


Farmerette says that the Euro has rallied against the dollar... this may not matter.. not if both currencies are screwed.. you might be comparing one load of rubbish against another load of rubbish.


I can't see the stock market doing too well if currencies collaspe,.. as many of these companies may have large cash reserves. Stocks can crash for other reasons...

The value of both gold and cash depends on perception.. but I feel that gold will never become worthless (besides massive changes in physics or space exploration), whereas cash could.

I accept that gold could drop in price, and may take decades to recover. But it could also double in price within three years. There has been no parabolic rise in the price of gold which would be indicitave of a bubble.


Silver too could be good... but I'd be waiting for the next correction before investing.
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the premise that the dollar and euro are screwed is based on nothing but worst case scenario doomsday , the sky is falling in , things will change utterley when we reach a certain level on the national debt , line of thinking , it may come to pass but thier is absolutley no guarentee it will either and the likelihood is that it wont , that the same economic armagedon merchants tend to be extremley vague in terms of the time periods they foresee gold sky rocketing , further adds to the belief that they are not to be taken seriously
 
farmerette said:
the premise that the dollar and euro are screwed is based on nothing but worst case scenario doomsday , the sky is falling in , things will change utterley when we reach a certain level on the national debt , line of thinking , it may come to pass but thier is absolutley no guarentee it will either and the likelihood is that it wont , that the same economic armagedon merchants tend to be extremley vague in terms of the time periods they foresee gold sky rocketing , further adds to the belief that they are not to be taken seriously
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Here is a good post on gold and its low level of ownership -

http://www.ft.com/cms/s/0/3b8b9f78-2312-11e0-ad0b-00144feab49a.html#axzz1BQBV5GAQ

(May need to register)

I don't think there is anyway but down for both the dollar and euro over the long term.

Posters here say the Euro is up against the dollar and therefore it must be safe. If you measure one flawed concept v the other then one has to give. It is not a sign of being a good currency when measured against another equally flawed one.

Gold is rising v all confetti IOUs, even the swiss franc. Every Western nation wants a cheap currency and will print and monetize as much as they can.

The US can never ever repay their debt the proper way. The electorate will not accept the tightening required. They will try and pay it off through inflating away slowly.

We may not have hyperinflation armageddon but as best the US and Europe must inflate away the debt by printing and negative real interest rates over the next decade.

In any potential outcome (for which no one really knows what will happen or when), gold has very little downside risk. The likelihood of the US ever repaying its debt correctly is zero, so wipe this option out. It cannot happen. No fundamentals can ever support this. All possible / likely outcomes are positive for gold unless by some miracle the US and Europe bring in some real politicians with the strength to clear the debt, cut the state and become wealth creating exporters again. Highly unlikely.

As Marc Faber says -

'And I can assure you-

As far as the eye can see the Federal Reserve will keep interest rates at zero.

Precicely zero.

And by zero I mean zero percent in real terms. They could be at 5% but if inflation is at 10% then you still have interest rates at minus 5% in real terms.

And when this happens ......cash and bonds are a bad investment, except for brief periods of time.

Equities are an avenue to preserve wealth and less risky than probably cash and government bonds'


He said the same about gold recently. Gold will only ever fall once REAL interest rates (i.e. Bank Base Rate minus the real Inflation rate, not the government spun lower RPI or CPI) becomes positive.

We are years and years away. His recently newsletter showed the emperical evidence that gold only ever falls when interest rates are positive.

Not sure on European Base Rate v the real inflation rate but as an example; The UK has a base rate of 0.5% and RPI of 4.5% or so. The real inflation rate is probably 5-6%. So the base rate needs to be north of 5-6% before gold will collapse in sterling terms. This will not happen for a considerably long time.

The Euro and US have probably got lower inflation than the UK but equally I bet the REAL inflation rate is higher than the the current base rates. This is positive for gold. Inflation is ticking up in the Euro zone and does anyone really believe the 1% US inflation rate?

If interest rates matched the real inflation rate globally then gold will fall hugely. We are years away.
 
JoeBallantin said:
Silver too could be good... but I'd be waiting for the next correction before investing.
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I sold my silver last month. When it gets so far above its 200 day moving average then good to take some profit. It was a good 40-50% above.

Probably get back in at some point but trying to find a better holding method than an ETF. I dont trust ETFs, especially ones held in a bust USA ;-)

At some point Mr Obama or some other economically clueless president will find it too tempting....

Likewise gold probably has a bit further to fall before becoming a good entry point. I wouldn't be buying at this price.

The best entry points I find are when there is a bit of doubt in your head about buying. I got into gold a couple of years back when everyone was talking of a huge crash. It felt uncomfortable to invest at that point but proved great timing (for once!).

I feel sentiment on gold is short term too good. Once it gets a bit negative then could be a good entry time.
 
farmerette said:
is it not clear from the smooth sale of portugeese , spanish and italian bonds last week plus the month long rally by the euro against the dollar that bearishness on the single currency was way over cooked
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Portugal sold €1.5bn at the last auction. They need to refinance €20bn this year ([broken link removed]), which means they have a very long way to go. Remember how Ireland's last bond auction was called a success, and then suddenly the IMF was here?

ringledman said:
The best entry points I find are when there is a bit of doubt in your head about buying. I got into gold a couple of years back when everyone was talking of a huge crash. It felt uncomfortable to invest at that point but proved great timing (for once!).
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I like this approach and have used it often. Goes back to Buffet's saying of being greedy when everyone is fearful and fearful when everyone is greedy. Also buying in August/September has done me well (look up a seasonal chart for gold).
 
In the last fortnight I joined an online gold site and have already made nearly 8% on the original investment. Naturally this has fluctuated even through the course of a day.

Is it wise to sell some of the gold (i.e. the 8% profit) each time I make a certain profit or should i just leave it long term. Thanks
 
groupthought said:
In the last fortnight I joined an online gold site and have already made nearly 8% on the original investment. Naturally this has fluctuated even through the course of a day.

Is it wise to sell some of the gold (i.e. the 8% profit) each time I make a certain profit or should i just leave it long term. Thanks
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It is said that "No one ever went broke by taking a profit" or words to that effect. It is difficult to predict the future in any investment else we would all be multi millionaires. Good for you, if you think gold will continue to rise, maybe hang on. If you think it will fall back, maybe sell. I realise that is no help but I don't think anyone on here can really answer your question. slim
 
thanks for that. I'm new to this investment thing. I was thinking that every time I made a certain amount i could withdraw it perhaps equalling the original investment amount over time.

However, my main reason for joining the goldrush was to ensure some security in case the € collapsed
 
groupthought said:
In the last fortnight I joined an online gold site and have already made nearly 8% on the original investment. Naturally this has fluctuated even through the course of a day.

Is it wise to sell some of the gold (i.e. the 8% profit) each time I make a certain profit or should i just leave it long term. Thanks
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What you are suggesting is not investing it is trading and this is a totally different game.
 
Yes of course.

I guess I'm worried that if there was a huge drop in gold value that i would lose most of my original investment. I guess I'm considering withdrawing any profits as time passes so should that happen I don't lose too much.
 
I have approximately 77.5K invested in various different assets. I have no need to access any of this money over the next 5-10 years and I would say that I can tolerate a medium to slightly higher than medium type risk.
Until recently (2 weeks ago) all money (approx 84K at the time) was invested in equities, 17% Chineese, 17% Emerging, 9% Irish, 14% Euro (all via Quinn Life freeway funds) and 43% invested in employers US based company shares via a tax write off vehicle called APSS.
In the middle of the recent stock market plunge I moved all my Quinn life funds into the cash freeway fund as I feared a 2008 type meltdown in the stock markets.
I am currently having a re-think on my asset allocation and have come to the conclusion that some type of investment in Gold may not be any harm at all, as a hedge against any potential future stock market meltdowns.
With this in mind I am thinking the following,
10K Gold
9K Emerging market freeway fund
3K Japanese freeway fund
3K Chineese freeway fund
20K Cash freeway fund
33K Company shares

I have no option with the company shares. These shares originated from bonuses and I elected to purchase shares with these. They are locked in for 3 years, at the end of which the income tax payable on the original bonus is written off. Essentially I have recieved the majority of them at a 52% discount (tax + PRSI + income levies). From last years budget, I have to pay the USC + PRSI so I get these at a 41% discount. Anyway, it has always worked out fairly well for me, as they are a blue chip share and even through the worst of times (eg 2008), I got the original net value of my bonus back.

So what do ye think of the above allocation?

Finally, I have an online stockborker account with Davy. They have 2 gold ETF's listed on it, the ETFS MTL GOLD (PHAU.L) and the GOLD BUL SEC ZC (GBSx.L). They don't supply much info on either. I done some googling and it seems the 1st ETF is listed on the London Stock Exchange and quoted in $.

From what I can gather there is no stamp duty or surcharges involved on this one. The second one I am having difficulty getting info on. I do know that both ETF's have increased almost exactly inline with the price of gold over the last year. Has anyone got any opinions on which one is the best to use?

Regards,
NM
 
A couple of points:

  • Selling in a falling market was costly for you if I read your post right. 84K dropped to 77.5K = loss of 6.5k. If you are a conservative or potentially nervous investor, you might want to stick with diversified blue chips with consistent performance. Remember to keep dividends in mind. These can be lucrative.
  • [broken link removed] ? See FT article.
  • See Gold charts. Consistent rises recorded as gold is a safety play. I could be wrong, but I wouldn't invest a cent in gold right now. The price will drop (collapse?) as soon as crisis is over, which will happen at some point, but when? That's the million dollar question. Has gold peaked? I don't know for sure, but it would be too risky imo to bet that it hasn't.
  • What interest rates apply to the cash fund? Can you do better investing in retail deposits?
  • Some sources of good information on shares/investments can be found at www.fool.com. Yahoo finance also provide good general info, as does http://www.moneyweek.com/
 
It's only costly if the markets pick up and the haven't. I quickly ran that Quinn portfolio through FE and that mix has fallen a further -2.72% in the last 2 weeks. Who knows if the markets are going to fall further? Getting out with a small enough loss may save Nomansland a lot in the long run.

I would agree about gold. I never advised people to invest in it purely because I didn't know enough about it and I never advise people on something I don't know. Also, when you see a safe haven assets posting high double digit returns, it's doing something its not supposed to do. In that case, you need to look at why is it making such large returns and is it going to be sustainable.

If you're going to go back into the market, drip your money in over a number of months to reduce the risk. I wouldn't touch Japan, returns in Japanese funds are usually negative. The time to invest there was just after the earthquake and it would have been an in and out bet. Look into what countries are in the emerging markets index, do is include China, so are you doubling up?

Finally, Quinn uses indexed funds. Is this the time to be investing in indexed funds? Would it not be better to have an actively managed fund during this volatility?
 
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