TonyCinTX

What's Next for Gold and Silver ETFs?

I am in Gold at 25% of my investment. Although I politically support the government spending that has and will occur on Obama's watch as necessary, I cannot see how it we can possibly pay for it without printing money. Print and spend is fine by me; it deflates our real debt (by paying it off with inflated dollars), but it does mean inflation and that HAS to mean gold rising.

I guess if you think we are going to get out from under the current financial mess by some means OTHER than printing money, Gold is a bad bet for you. But I will remind you that taxes, fees, or reduced government payments of any kind are politically unpopular, and only about 15% of voters care anything about the deficit, and only about 5% understand the ramifications (or are even affected) by the government printing money. So my guess is, the politically easy way out is to start the presses.

The Dow's Weight in Gold

Oh c'mon, a linear trend on an obviously exponential curve? This is a joke, right?

Not by any chartist magic, but by simple robust statistical fitting to *appropriate* curves, we can see a significant chance of the Dow settling in at the 6000 range (but more likely 9000) and a rise in Gold to 1200 with what seems like inevitable inflation (not hyper). I can't even see where a ratio of "5" or "7" is on this stupid chart.

The biggest thing holding Gold down right now is increased supply due to sales of scrap gold (old jewelry), which has risen due to the recession, and will play out in a few years.

So let us ask the most basic question: By what logic is the relationship between Gold and the Dow meaningful at all? I don't understand what the interaction between these is supposed to be; it isn't like a company where earnings and growth and the value of future opportunity all determine the stock price, which can thusly be used as a rough proxy for judging the competence of the company, or at least the public perception of the prospects of the company.

I think this Dow/Gold comparison is just a skewed version of the Dow itself, it tells us nothing new.

The Bedrock Case for the Return of the Gold Bull

It is funny how many ideologues rail against fiat currency. Well, guess what? You are wasting your time, and anything you want you can buy with that currency. Wake up, dudes. Thomas Jefferson was wrong, I own clear title to real property, stocks, bonds, gold, diamonds, cars, electronics and more, all bought with my "fiat currency", funny money, whatever you want to call it. The fact is that stores take twenties in exchange for their goods without question. So what's the point of all this conspiracy theory that is never going to lead to anything important?

Gold and the Dollar: Putting the Relative Cart Before the Relative Horse

The economy sucks and will continue to suck for the foreseeable future. I am not 100% gold, but I am 25% gold and will stay that way, because the dollar will weaken further and Gold will inevitably rise. Politics can do a lot to affect changes, but ultimately they really are all short fixes and facades and bailouts, in the long term the War on Terror is a debt factory that kills the economy. Oil demand will continue to grow in China and India and the rest of the world, political quick fixes are like cocaine in that they do far more long term harm than their immediate feel-good boosts, and all of this means the dollar will dive. Gold isn't a great investment, but it retains its value. When I see the dollar beating both the Euro and Canadian dollar again, then it will be time to consider selling gold.

The Bedrock Case for the Return of the Gold Bull

Litle: Wow, I love this article.

Jakedeez: The point of owning gold is the point of any stock; owning a share of Dell doesn't give you any trading rights to property or equipment or product, you can't go collect on your share whenever you want. You own the stock because you think the *stock* will go up. All these people arguing about whether gold can be used as currency are fools. Stocks can't be used as currency either!

In the case of Gold (IAU for instance), there is a tendency for the price to move counter to the international buying power of the dollar. It also runs counter to some stocks (but tends to move in the same direction as the S&P overall). So for some investments, you can reduce risk by making Gold a part of the mix.

The point has nothing to do with inflation or long term investment, the point has to do with the short term moves of stocks and gold and other commodities, and overall volatility. The advantage of controlling volatility is predictability, at the cost of greater upside. At an extreme for controlling volatility we just buy bonds, but even that doesn't protect you against the dollar sliding; gold does.

Personally, I keep 20-25% of my investments in gold (currently, IAU) since 2005, rebalancing every quarter. I do this because of national debt concerns, the value of the dollar is sliding and I don't think the long term outlook for that is good. If my opinion changes, so will my gold investment. Recently, gold has been tracking energy costs and those seem likely to rise long term as well.

The Myth of Gold as an Inflation Hedge

TRELVIN: >>> Would I carry gold and water in the desert for very long?

WHAT? As to water, YES. As to gold, yes. Somebody might trade me food or more water or shelter or transportation for the gold, so I doubt even a pound of gold coins is going to make a huge difference in how far I can go in the desert. If I can only choose one, I'll take the water, but that (as is pointed out in a post above) is a false choice, we can split our investment money pretty finely.

Also, I disagree with the idea that velocity represents the "intrinsic worth" of gold, it's intrinsic worth is in its rarity and as an ingredient in its inherent elemental properties that cannot be duplicated. It is not just jewelry and its value is not entirely due to some sort of psychological quirk of humans. As for velocity, I don't care a whit how often others are trading gold or whether there is an "opportunity" to raise a price, and I don't know any serious investor that does. My only opportunity to raise the price is when **I** sell what I have. I agree that liquidity is an important consideration, and very active trading is a clear indicator of assymetric information (and a bubble when one side of that information is just mistakenly optimistic). But such indicators are not predictive of prices, they just warn you to pay attention and find out what it is you don't know, and correct at least what may be a personal information deficit.

The Myth of Gold as an Inflation Hedge

FYI, look at this CPI chart on wiki. It isn't hard to find this stuff.

en.wikipedia.org/wiki/...

The Myth of Gold as an Inflation Hedge

Well, isn't this ridiculous? Why start in 1980? Why not in 1985, it is up 120% since then. Why not inflation adjusted?

In 1980 we had the most inflation since 1940 or so, and that is why gold was high. The CPI was 100 in 1982-84, and it is currently around twice that, indicating the value of the dollar has HALVED since then. GOLD has indeed been an inflation hedge, you cannot talk about gold as an inflation hedge being a MYTH without taking inflation into account! Nobody is claiming that it is some great investment, the only claim is that it holds it value when dollars are in decline, so it is at least a safe harbor. And if Newmont Mining is to be believed, it is getting harder to find and reduced supply with increased demand is going to make it an even safer harbor.

Gold/Dollar Correlation

>> Charts should be in percentages...

David, the flaw in this chart is not the scale, it is the reference. I don't argue about the idea the dollar is falling, but in THIS chart, relative to what, exactly? Good quality man's suits, as stated in the lead in?
Perhaps yen or krona or euros or canadian dollars, who knows, from this chart. Some people use GOLD as the standard, how do we know that the inverse price of gold is not infecting the value of the dollar in this chart?

If you want to make this comparison, you need to do exactly what Burshre talks about above: Measure it in terms of some form of purchasing power, preferably on stably priced items like basic bread; i.e. not subject to many supply and demand fluctuations, so it reflects primarily inflation. A good candidate is the CPI of food at bls.gov (Bureau of Labor Statistics). Any measurement against another form of currency, which is probably itself be heavily negatively correlated to the price of gold, is just circular reasoning.

All that said, I do keep 1/3 of my portfolio in gold, every time I rebalance it, as a counterweight to currency fluctuations. It reduces overall return but also reduces variance and overall losses in the downturns, and I prefer the greater stability and predictability that holding both stocks and gold provides.

IAU: Can Spot Gold Continue Its Tear?

About 25% of my portfolio is IAU. It may be true but a little misleading to claim gold has shown little correlation with broad market indices. Grab your spreadsheet and see how it behaves with your own past portfolio(s). The important point is not correlation anyway; the important point is whether, in the context of the securities you typically own and have interest in, how would allocating 10% or 15% or 25% of your assets to gold (or silver or oil) have changed the metrics that interest you, such as quarterly downside risk, volatility or overall return?

More than half my portfolio is individual stocks that are chosen specifically to avoid the broad market indices, and combined with these a 25% stake in IAU has provided stability and reliability for over a year, at almost no cost in returns, since well before the current "surge".

The histories are easy to get. Go back a few years and see for yourself in your own portfolio. My suggestion is to set some fixed percentage of assets in IAU at the beginning of each quarter, and rebalance quarterly, with the remainder of your portfolio proportionally split the same as it is now.

Past performance may not predict future returns, but then again, some dynamics never die.