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Gold Is Not An Investment.

 
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282 Posts
 Posted 05/05/2019  08:51 am  Show Profile   Bookmark this reply Add Sharkman to your friends list Get a Link to this Reply
Mmerlinn
Using the price of gasoline is cherrypicking. If you'd chosen color televisions you would have reached the opposite conclusion. That is why I compared overall purchasing power between 1964 and 2019.
Using Montgomery Ward is also cherrypicking. If you'd chosen IBM, Microsoft, Intel or Amazon you would have reached the opposite conclusion as well. That is why I used a market index, the Dow, which wraps the winners and losers together. Anyone who is in the stock market who is not diversified to protect against the failures of individual stocks should not be in the market.
I am not sure what you mean by characterizing stock market value changes as "massive." 10-20% variations are not uncommon, but the market has always snapped back to exceed prior values. During the 2008 financial meltdown, the stock market briefly dropped 50%, its worst drop since the Great Depression. After the economy stabilized, it began rising again and by 2012 it was above its pre-2008 highs. In 2019 it is twice as high as it was in 2012 when it passed its pre-2008 highs.
Gold peaked at over $1800/oz. in 2011. 8 years later it is down to less than $1300. That might also qualify as a massive change.
It has certainly been better to be in stocks than gold over the last eight years, and historically, for all times records have been kept, except for transitory periods when gold is rising and stocks are falling.
And the stock index prices do not account for dividends paid along the way, or for additional profits from reinvesting those dividends. So I can't discount the Dow as a "rubber" measurement.
I am currently retired and the income from my still rising stock portfolio is primarily what my wife and I live on. In our case, we would be in real trouble if we were in gold, as it pays no dividends and goes through long periods of flat valuations.
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 Posted 05/05/2019  12:05 pm  Show Profile   Bookmark this reply Add Alpha2814 to your friends list Get a Link to this Reply
Using 1964 as a reference point for gold pricing is cherrypicking too because it ignores the enormous impact of the early 1970s when we ended the gold standard and people could legally own it again. Prior to that, there was no (or a very limited) open market for gold.
Working on: Peace dollars (two to go), US type (early Bust era), Indian quarter eagles, Chinese pandas, and San Francisco tokens.

"Fear is the enemy of will. Will is what makes you take action; fear is what stops you, and makes you weak."
-- Sinestro to (my avatar) Hal Jordan, "Green Lantern" (2011)
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 Posted 05/05/2019  2:38 pm  Show Profile   Bookmark this reply Add Kopper Ken to your friends list Get a Link to this Reply
When is gold is going to $2400 (100%)? 2years, 5 years, 10years. It's all in your gut and pain tolerance. An investment in equity returning a moderate 7% will double in about 11 years. If you can see gold doing that then its an alternative place to put some cash.

KK
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 Posted 05/05/2019  2:52 pm  Show Profile   Bookmark this reply Add Sharkman to your friends list Get a Link to this Reply
Alpha, you raise an excellent point. Gold rose rapidly in value from $43.90 in 1971 to $197.50 in 1974. It had its first value correction in 1975-76 when it dropped from a high of $197.50 to a low of $103.05. It began a steep rise in 1977 topping out at $599.25 in 1981. This coincided with a period of hyperinflation with interest rates exceeding 20%. For almost 20 years thereafter, gold declined steadily, closing 1998 at $287.45, a decline of $311.80 over 17 years. It then increased steadily to a 2008 year end closing price of $692.50. This is still only a gain of $96.25 over 27 years, which, when adjusted for inflation approaches zero. Then in 2009 in the wake of the greatest financial crisis since the Great Depression, gold took off like a rocket rising to a high of $1896.50. As the economy has increasingly improved, the price of gold has dropped to its current price of $1299.25.
Clearly people have made money in gold since both 1964 and the early 1970s. But it seems that WHEN you own it is critical. If an investor jumps on the elevator early in a period when gold is skyrocketing and gets out before it begins its long corrective downward journey, there is a killing to be made. But conventional wisdom is that no person or machine can reliably time markets. If you come in at the wrong time, you could be looking at a very long period of stagnation or even loss. The good periods are relatively short, while the not so good periods can go on for decades.
There does seem to be a coincidence between great economic turmoil and uncertainty and rapidly rising gold prices. But to me at least, there does not seem to be enough data to confirm a correlation, although the existence of a correlation certainly makes intuitive sense.
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 Posted 05/05/2019  2:57 pm  Show Profile   Bookmark this reply Add macmercury to your friends list Get a Link to this Reply
Everyone should not invest in gold, so I can pick up gold coins cheap when prices drops back to 1964 level.

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 Posted 05/16/2019  8:21 pm  Show Profile   Bookmark this reply Add Libertad to your friends list Get a Link to this Reply
" I do not believe it to be a prudent course of action to put any part of your life savings in an inanimate object that has no intrinsic value, provides no income stream, earns no money at all, and in fact, can cost you quite a bit if you own physical gold."

WRONG. If you know how to manipulate the metal you can gain a living from gold. This guy is looking at gold like it's a stock. It's not. It's a metal. But he is correct in saying you shouldn't treat it like it's going to earn you money sitting in a vault.

"It is instead a speculative asset people hold in an effort to play on the emotions of market participants that push the price higher or lower on the basis of fear in the world."
This very "fear" is used in the jewelry manufacturing industry to demand payment from debtors. Since the price moves daily it's very tricky to take returns days after the fact. Jewellers live by the MINUTE. The difference is that the actions of the small players don't affect the price in all of their actions; that's decided by investor-type people who don't touch 24 karat gold daily. If it were up to me I would like the price to be steady forever. Dips in price lower the prestige of owning gold, and yet spikes in price make it unaccessible to most people. When the price was steady and tied to the US dollar is when jewellery had its finest era of craftsmanship. Now the price is volatile and people demand mass-produced trash. With people so removed from the making of products, they become ignorant saps in the marketplace.
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 Posted 05/16/2019  8:41 pm  Show Profile   Bookmark this reply Add Libertad to your friends list Get a Link to this Reply
I'm just thinking, if people were ever to use gold again as currency, like in Venezuela... I don't think it would be an effective standard currency, per se, but it would hold solid as a temporary debt repayment between trusted people in the hopes of repaying with currency after the crisis has ended. It would work like this:
Your neighbor comes to you in need of something, propane let's say, to keep the kids warm during a riot or martial law. They can't pay you because the roads are closed. They give you a 5 grams gold bar for safe keeping. You give it a value and enter it into a ledger to which you credit them. If the new currency hasn't devalued much after the crisis you give the gold back and they pay you in currency. But if the currency has hyperinflated or if there's a new currency you just keep the gold or recalculate as you wish. The purpose for exchanging the gold would be in case your neighbor dies or flees, then you have some type of payment.
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 Posted 05/18/2019  11:35 am  Show Profile   Bookmark this reply Add atticguy to your friends list Get a Link to this Reply
I mentioned back in December that I had watched an episode of "The Twilight Zone" that played upon the idea of the future of gold. I just noticed that this episode (The Rip Van Winkle Caper) is being replayed this upcoming Tuesday (5/21/19) morning at 12:30am (eastern standard time) on WDIV-TV3 (Me-TV). I know it's in the middle of the night but thought if anyone was interested they could maybe tape it if they couldn't stay up to watch it.
It was written in 1961 and talks about 'investing' in gold. As I mentioned in my previous post, the last two minutes of the show really made me think.
If anyone DOES watch it, I'd like to know your thoughts of "2061"; possible or impossible?
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 Posted 05/18/2019  11:40 pm  Show Profile   Bookmark this reply Add llewellin to your friends list Get a Link to this Reply
Impossible - the premise was that the nuclear age had brought an economical method for manufacturing gold from lesser metals. Over half the way to 2061 and this is still impossible and will remain so, but at the time the notion was conceivable in science fiction.

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 Posted 05/19/2019  01:17 am  Show Profile   Bookmark this reply Add jbuck to your friends list Get a Link to this Reply

Quote:
I mentioned back in December that I had watched an episode of "The Twilight Zone" that played upon the idea of the future of gold. I just noticed that this episode (The Rip Van Winkle Caper) is being replayed this upcoming Tuesday (5/21/19) morning at 12:30am (eastern standard time) on WDIV-TV3 (Me-TV). I know it's in the middle of the night but thought if anyone was interested they could maybe tape it if they couldn't stay up to watch it.
Thanks!


Quote:
Over half the way to 2061 and this is still impossible and will remain so,
Not impossible. Stars do it all the time. It will be simple if we can ever figure out cold fusion.
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 Posted 05/19/2019  9:24 pm  Show Profile   Bookmark this reply Add llewellin to your friends list Get a Link to this Reply
I'll repeat myself - it is impossible for gold to be economically produced from other metals. We've already done this in reactors and have been able to do so for a long time. The minute quantities produced and involved separation from other elements make distillation from seawater a more feasible alternative.
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 Posted 05/19/2019  9:51 pm  Show Profile   Check paralyse's eBay Listings Bookmark this reply Add paralyse to your friends list Get a Link to this Reply
If the "end times" feared by the doomsday preppers come to pass, and we are forced to revert to a primitive state of anarchy, medicine, firearms/ammunition, food, and clean water will be infinitely more valuable than gold.

Gold is pretty, but not really useful for much of anything except making jewelry, coins, dental fillings, and electronic components, with a few other niche uses as well; silver is more practical and more durable, but slightly less ductile and a good deal less corrosion-resistant.

Personally, I still believe that the safest, if not the most profitable, investment strategy is diversity -- if you have some income-generating real estate, some precious metals, some commodities, liquid USD, blue chip stocks, muni bonds, T-bills, and perhaps some forex holdings in EUR or CNY/RMB, you are pretty well insulated against most economic catastrophes. I consider gold (and platinum and silver) to be simply one part of an overall investment plan -- things which are good to have in moderation, but not to where all of your money is going there.

It's silly to claim that gold is not an investment, but whether it's a good investment or not depends on how you define "good" when taking into account utility, demand (and its sources), inflation, and other predictors of future performance. If gold has gone up, but the purchasing power of a dollar has gone down, the apparent "profit" of your investment might look good on paper, but economically, the gain is much smaller.
Member ANA - EAC - TNA - SSDC
Specializing in 1932-1964 Washington quarters

"Most of the things worth doing in the world had been declared impossible before they were done." -- Louis D. Brandeis
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 Posted 05/20/2019  10:04 am  Show Profile   Bookmark this reply Add jbuck to your friends list Get a Link to this Reply

Quote:
I'll repeat myself - it is impossible for gold to be economically produced from other metals.
That is better.
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 Posted 05/20/2019  9:50 pm  Show Profile   Bookmark this reply Add fistfulladirt to your friends list Get a Link to this Reply

Quote:
Gold is pretty, but not really useful for much of anything except making jewelry, coins, dental fillings, and electronic components
Yep - not a whole lot of use at all right there! /s
When I listen to LED ZEPPELIN...so do my neighbors...
Roll hunting since '77
Dirt fishing since '72
Edited by fistfulladirt
05/20/2019 9:51 pm
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 Posted 05/20/2019  9:55 pm  Show Profile   Bookmark this reply Add fistfulladirt to your friends list Get a Link to this Reply
Speaking of precious - this time of year many of us are investing our time in morel mushroom hunts - that fungus is worth it's weight in gold!
When I listen to LED ZEPPELIN...so do my neighbors...
Roll hunting since '77
Dirt fishing since '72
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