Opinion - Gold Sux

Glad you figured that out. I am still scratching my head in an attempt to unwind all the illogic in this piece. I am sure that for every single reason a person can come up with for gold to fall, an equally good argument can be made for the exact opposite.

Most investors will be best served by a well diversified portfolio of multiple asset classes. Gold and silver are in the PM asset class, which is a subset of the commodities asset class. If someone wants a 5-10% exposure to this asset class, that should be fine with anyone who is objective about investing. If they want to go all-in and put 100% of their money in PMs, well, that's fine too. Not recommended, mind you, but perfectly fine since it IS their money!

Remember folks, just as there are rabid gold and silver bugs, there are also just as rabid anti gold and silver people. All of which is fine. People can be and do what they want. There is, however, no need to drag others into our personal beliefs. Show them what you think is the best evidence of the benefits of owning some PMs and then let them make up their own minds. If at some point in the future, that turns out not to have been a good decision, then so be it. Stuff happens.

Sure, but about a decade ago when gold was $200-300, imagine what kind of years-long storm you'd have to weather just to break even if you bought at the price today and it declined again to those lows. People may scoff at the notion, but it's happened before and it will likely happen again. I remember when buying a house was considered a surefire method of building equity for retirement because real estate seemed immune to market fluctuations or even recessions. My house has lost at least 30% of its pre-2008 value (but property taxes remain the same, somehow) and it wouldn't surprise if it loses more equity before things improve. Now, the experts claim renting makes just as much or more sense, long term. Ed's strategy of mass diversification seems the best play.

@traevin, LOL, the housing market!

Anytime someone hires cheap, illegal labor to build a home and then sells it for 3x the cost to build... something has to give in pricing.

Have you ever analyzed what home appraisers really do? While some out there may be good, the ones I have worked with in Louisiana are woefully under qualified.

One of the things that we must guard against is thinking in the past. Yes, gold has had its ups and downs in the past and probably will again. All commodities do and PMs are commodities. But... the current US and world financial situation is WAY different today than it ever has been, so what we learned from the past may or may not apply in this radically changed environment. With the massive sovereign debt out there, massive money printing, and weak economies all combining into what very well could be a "perfect storm" for investors, having some PMs looks to me like some very reasonably priced insurance. I would not put a huge amount into PMs, or any other investment for that matter, but 10% or so looks pretty good to me. The upside potential for gain seems much better than the downside risk.

As to houses vs. PMs, yes, houses were in a bubble and had all of the characteristics of a bubble. New homes in our area were selling for $150 a sq, ft. in 2006, which is a ridiculous price. We were considering buying a new house then but decided not to because of pricing. PMs, OTOH, are not in a bubble and have none of the characteristics of a bubble. Typically, bubbles form when: 1) many people are getting into an investment and bidding up the prices beyond all recognition (think NASDAQ stocks in 1999 or flipping houses in 2005-7); 2) valuations are WAY out of proportion when compared to other assets; or 3) the government and / or the Fed are seriously distorting the market via their policies. When considered in this light, we do not have a PM bubble. What we really have is a government spending bubble that is distorting the markets. Yes, PM prices are higher now than they have been but higher price alone is not sufficient to show that a bubble exists. They can be a component of a bubble and may result from a bubble but they are not the cause of it. PMs are high in price now primarily because fiat currencies are weak. The same can be said of oil. This is what appears to be happening when PMs are priced in fiat but not what happens when PMs are priced in oil or other valuable commodity. It was a real eye-opener for me to see a chart of the Dow 30 vs. gold for the past 20 or so years. At a time when the US stock market was rising rapidly in dollars, it was also falling in terms of ozs. of gold. Since gold is a better measuring stick of value vs. dollars, it told me that stocks were in trouble and that a substantial correction was likely. We got that correction in 2008. Also, we know from economics that when an item is doubled in quantity but the demand remains the same, its price will fall by about half. Although there are many other factors that influence commodity prices, we are seeing this to some extent in many of the fiat currencies now and will likely continue to see it until the US, European, and Japanese economies get stronger. Until then, PMs should remain fairly strong in spite of their short-term volatility.

Just my $0.02. Free info and well worth every penny!