Gold as a Savings Instrument - Not an Investment 22 comments
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With the cries of global economic collapse on the wane and a low inflation scenario gold as an investment hedge does not make sense. However gold as a savings vehicle does make sense at this time. Gold is the ultimate currency for ensuring that both generational wealth and your current earnings maintain the value of the work and savvy investment decisions made by you and your ancestors is not slowly or in the catastrophic economic collapse scenario quickly eroded away.
Gold is money. Real money, tangible money unlike the fiat paper currencies that fluctuate with political whims and agreements on their value that can be altered by board room shenanigans or Oval Office decisions that are beyond logical comprehension. Gold is money not an investment. It must be analyzed as money and to do this it must be compared to other currencies such as the US Dollar.
Is the value of gold going up or is the agreed upon value of currencies going down? Currencies around the globe are depreciating. The currencies must depreciate because one must remember that the value of assets is driven by the ultimate law of supply and demand. One can analyze charts until their eyes turn red and bleed a river down their cheeks as Fibonacci rolls over in his grave , however the natural law that governs all asset value is supply and demand. Look no further than the precipitous decline in the value of housing (another asset that should not be considered an investment) supply even outstripped a demand that was inflated by Dr. Doublespeak Greenspan and his boy wonder protege C-130 Ben (helicopters did not do the job for Ben he has upgraded to a C-130). Printing more money increases the supply and the fundamental law of markets (i.e. supply and demand) will eventually correct the value of the money regardless of the latest press release from the White House.
The following table presents gold’s performance over the past eight years in terms of nine different currencies.
click to enlarge image
Gold is not really appreciating the other currencies are depreciating. Gold is money like the other fiat currencies but it is clear that gold has and always will hold it's value because it has a tangibility that is agreed upon around the globe.
You can either save money or spend it. Saving money is a good thing in fact Bama Booma has recently implored Americans to save. It is wise to save gold in order to build-up your savings. This strategy continues to make good sense. So save gold; don’t view it to be an investment. Gold is money.
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Doug T.....The mutual fund guy
Go for the Gold--The bottom line matters
www.mutualfundwealth.com/
Don't you think that headlines like the one below in the Telegraph indicate that we are in the midst of a retail-led bubble in the price of gold?
"iPhone users can now jump on the gold bandwagon" - iPhone users can now trade gold from their iPhone.
I've been advocating for some time now that gold is a dangerous place to be right now, and if you really are wanting to hedge inflation, then base metals are a much better bet. I can't believe everyone is so blinkered in their views on gold being a sure thing.
Disclosure: Have been short Gold ETF and long XTA, XME and RIO since 15th March.
One thing that drives me insane is the following premise "Gold is money. Real money, tangible money unlike the fiat paper currencies ..." I get that it is tangible and in limited supply.
Why does gold have any more value than currency? They are all really assets with "perceived" value. Gold has much less industrial use than other precious metals. It has value because someone in ancient times said it had value, and that has remained throughout time (our view of time).
I would much rather be long Platinum here. I am actually bearish on Platinum near-term, but it should outperform Gold for almost any slice of time from here.
1) Extraction is getting more expensive
2) It is a finite resource, and there is less and less of it remaining.
blah, blah, blah
However, in their favour, base metals also tend to have more real-life uses as well. China/India/Russia cannot build railways and factories with gold!
Yes, I agree, basic economics tells us that adding to the money supply temporarily increases output but more permanently increases price levels. However, these effects do not happen overnight! In fact, research has showed that it can take years, and that is not even factoring in a recession. People are blinded by the "printing press" cliché, and do not realise that gold prices could halve from here before they start to move up again. Some store of value that is!
If you look at my previous posts I have noted that it is illogical to be long gold and ignore base metals if you really are concerned about inflation. To date, my positioning has proved to be very profitable, and I believe this will continue.
"What I don't understand is why people are
choosing gold rather than base metals as the play here. "
One of the main reasons to hold gold lies within its versatility. You can carry around the equivalent of new car or house down payment in your pocket should you wish. Another is its instant liquidity, easily convertible to cash anywhere in the world, often at a premium.
Try that with copper, lead or zinc.
Now if you're talking stocks, that's a different argument. Gold stocks are difficult to predict and notoriously volatile. A good base metal deposit is often a little gold mine of returns but, again, try to convert your paper anywhere but at your broker or bank. The article is discussing saving, not speculation.
On October 15, 2008 this chart said that same $100k invested in the NASDAQ mentioned above would be worth $40, 327
the S & P 500 would be worth $62,022
the DOW would be worth $74,897
Silver would be worth $188,991 and $100k invested in GOLD on January 1, 2000 would be worth on October 15, 2008
$293,588
This chart was published at Casey Research dot com and if one picture was ever worth a thousand words....well, I wish I could show it to you because the anti gold people STILL....can't handle the truth. And the truth IS, since January 1, 2000 and besides being REAL MONEY, GOLD (and PM's in general) HAS BEEN THE PLACE TO BE, at least in that time frame.
How childish.
On Apr 16 12:55 PM RUSSIANFM wrote:
> Another gold bug...
>
> Don't you think that headlines like the one below in the Telegraph
> indicate that we are in the midst of a retail-led bubble in the price
> of gold?
>
> "iPhone users can now jump on the gold bandwagon" - iPhone users
> can now trade gold from their iPhone.
>
> I've been advocating for some time now that gold is a dangerous place
> to be right now, and if you really are wanting to hedge inflation,
> then base metals are a much better bet. I can't believe everyone
> is so blinkered in their views on gold being a sure thing.
>
> Disclosure: Have been short Gold ETF and long XTA, XME and RIO since
> 15th March.
On Apr 16 01:48 PM Eric in IL wrote:
> I appreciate your perspective here. I agree more with your savings
> argument. I do not "invest" in gold near-term, but for a long-term
> hedge it is very prudent.
> One thing that drives me insane is the following premise "Gold is
> money. Real money, tangible money unlike the fiat paper currencies
> ..." I get that it is tangible and in limited supply.
> Why does gold have any more value than currency? They are all really
> assets with "perceived" value. Gold has much less industrial use
> than other precious metals. It has value because someone in ancient
> times said it had value, and that has remained throughout time (our
> view of time).
> I would much rather be long Platinum here. I am actually bearish
> on Platinum near-term, but it should outperform Gold for almost any
> slice of time from here.
On Apr 16 04:08 PM RUSSIANFM wrote:
> Mad Hedge Fund Trader, I understand your perspective about production,
> store of value etc etc. What I don't understand is why people are
> choosing gold rather than base metals as the play here. Most of the
> arguments applied to Gold can also be applied to the other base metals
> which are trading near their lows:
> 1) Extraction is getting more expensive
> 2) It is a finite resource, and there is less and less of it remaining.
>
> blah, blah, blah
> However, in their favour, base metals also tend to have more real-life
> uses as well. China/India/Russia cannot build railways and factories
> with gold!
>
> Yes, I agree, basic economics tells us that adding to the money supply
> temporarily increases output but more permanently increases price
> levels. However, these effects do not happen overnight! In fact,
> research has showed that it can take years, and that is not even
> factoring in a recession. People are blinded by the "printing press"
> cliché, and do not realise that gold prices could halve from here
> before they start to move up again. Some store of value that is!
>
>
> If you look at my previous posts I have noted that it is illogical
> to be long gold and ignore base metals if you really are concerned
> about inflation. To date, my positioning has proved to be very profitable,
> and I believe this will continue.
On Apr 17 09:16 AM drbob66 wrote:
> "Bama Booma"?
>
> How childish.
On Apr 17 09:16 AM drbob66 wrote:
> "Bama Booma"?
>
> How childish.
There's nothing wrong with owning Gold Stocks (e.g miners Rio or BHP) but the idea of owning gold as an investment is idiotic. It makes me laugh. It's so Y2K: "buy gold, stockpile guns, get ready for civil unrest".
To have Koogerrands(sp) is funny or a novelty but to invest in physical gold is absurd - unless you live in a third world country and have to get out or a country where women have no property rights so all they have is jewlery.
Buy Gold. How stupid can people be. What's going on now is the smart money is just trying to sucker in all the losers to cover the fact that the things aren't quite as bad as they were last fall when people were scared out of thier minds and bought a bunch of gold as a safe haven. Get ready for people to unload...Gold is useless.
For example, what if five years down the road we do, as our idiot Treasure Secretary suggests (I swear sometimes its like a bunch of kids on Washington who have do idea what they are saying)and head toward an international synthetic currency (instead of using USDs)? What good would gold be then?
Gold as an investment what a joke. While your at it why don't you get a generator and stockpile some guns and turnips? Y2K is coming don't you know!
GOLD!
PS I assume from your name that you make your living on your knees.
On Apr 17 03:43 PM HardwoodFlooring wrote:
> GOLD! Hah. What a joke. Unless you're pawn shop owner who gives a
> rip.
>
> There's nothing wrong with owning Gold Stocks (e.g miners Rio or
> BHP) but the idea of owning gold as an investment is idiotic. It
> makes me laugh. It's so Y2K: "buy gold, stockpile guns, get ready
> for civil unrest".
>
> To have Koogerrands(sp) is funny or a novelty but to invest in physical
> gold is absurd - unless you live in a third world country and have
> to get out or a country where women have no property rights so all
> they have is jewlery.
>
> Buy Gold. How stupid can people be. What's going on now is the smart
> money is just trying to sucker in all the losers to cover the fact
> that the things aren't quite as bad as they were last fall when people
> were scared out of thier minds and bought a bunch of gold as a safe
> haven. Get ready for people to unload...Gold is useless.
>
> For example, what if five years down the road we do, as our idiot
> Treasure Secretary suggests (I swear sometimes its like a bunch of
> kids on Washington who have do idea what they are saying)and head
> toward an international synthetic currency (instead of using USDs)?
> What good would gold be then?
>
> Gold as an investment what a joke. While your at it why don't you
> get a generator and stockpile some guns and turnips? Y2K is coming
> don't you know!
>
> GOLD!