Anyone buying GOLD or GOLD miners

[nash031]

I can't predict the future value of anything. Good for you that you can. Equity prices are often driven by emotion, not intrinsic value. Net, Au is just something else I can't predict. I'm far from hooked. I just want to spread my chances around widely. Can't see the market timing aspect to it if you buy & hold.

I never said I could predict the future value of anything. What I can do is evaluate some assets as "undervalued" at their current prices, and invest in those with a better degree of certainty that they will return to their true/intrinsic value. Companies own assets which have value that's easily defined, and companies sometimes sell at prices per share lower than their true value.

I don't think you can pin an intrinsic value on gold, since its value is solely derived based on what someone will pay for it. In that regard, it is the same as any other commodity - which is why I say it's not special - and I avoid commodity investing for the reason stated above.

To each their own.

By the way, I didn't quote you, nor was my post directed at you, nor do I particularly disagree with anything you said. VFK started another thread about currency wars. He's pretty clearly hooked, IMO.

 

[VFK57]

I never said I could predict the future value of anything. What I can do is evaluate some assets as "undervalued" at their current prices, and invest in those with a better degree of certainty that they will return to their true/intrinsic value. Companies own assets which have value that's easily defined, and companies sometimes sell at prices per share lower than their true value.

I don't think you can pin an intrinsic value on gold, since its value is solely derived based on what someone will pay for it. In that regard, it is the same as any other commodity - which is why I say it's not special - and I avoid commodity investing for the reason stated above.

To each their own.

By the way, I didn't quote you, nor was my post directed at you, nor do I particularly disagree with anything you said. VFK started another thread about currency wars. He's pretty clearly hooked, IMO.

I am not hooked to anything. Same as many early retirees here I am diversifying my AA and think that PMs should be there. It is a smallest part of my AA but I plan to keep it.

 

[Totoro]

If Gold is not "special" hard currency then why Central Banks do not dispose of it?

Lots of possible reasons. One is that you cannot dump a large amount without destroying the market. Gold is mostly sentiment so there is no strong floor.

Another is that as a country having too much foreign currency has political implications.

Having gold can also be a defense mechanism vs. currency speculation by others, especially if you are unstable to begin with (Russia, Venezuela).

And then there is inertia. You dug the pit anyway, and the stuff is lying there. No rush to move it anywhere.

Also, as a central bank holding reserves in equities isn't really an option. Negative interest rates on cash (before inflation).

None of these apply to retail investors.

 

[nash031]

I am not hooked to anything. Same as many early retirees here I am diversifying my AA and think that PMs should be there. It is a smallest part of my AA but I plan to keep it.

And no one is trying to tell you to do otherwise.

 

[Totoro]

I don't see holding US$ or putting it in a low-paying account as better. Au is just another type of cash to me that protects against fiat currency inflation. Ultimately, I can't see that not happening with the budget imbalances. I'm quite willing to risk I'm wrong.

Looking at the numbers I don't see Au as giving inflation protection. It's uncorrelated and loses money over the long term.
Forbes Welcome

Why not TIPS then, or indeed equities?

To each his own obviously.

 

[VFK57]

Looking at the numbers I don't see Au as giving inflation protection. It's uncorrelated and loses money over the long term.
Forbes Welcome

Why not TIPS then, or indeed equities?

To each his own obviously.

It looks like you are closing your eyes on history. In 1913 Germany was the leading world economy and it would be laughable if someone would suggest that by 1919 one will need a cart loaded with paper marks in order to purchase a loaf of bread. In 1988 USSR most people would not believe that thousands of paper rubles would be worthless to buy anything in 1992. Yet in both cases Gold coins or jewelry would buy you needed food or services. My daughter in law had experienced the above condition in former Soviet republic of Georgia (her family survived selling Gold jewelry). I do not think similar condition would happen here but please compare the Gold prices vs high inflation here in US. How sure you are that high inflation is not possible here?

 

[nash031]

How sure you are that high inflation is not possible here?

High inflation is absolutely possible here, but that does not necessarily mean gold is the best hedge against it. I understand that you have been convinced that it is by people who some of us view as nothing more than salesmen. In such a case, it's better to agree to disagree and let it go.

To answer the question you posed in the OP: no, I am not buying gold nor miners for reasons previously stated. Now I'm going to take my own advice...

 

[Whisper66]

If anyone lives by the motto of buying when everyone is scared, isn't now a good time to buy Gold or Gold miners (GDX/GDXJ)? Thoughts?

Moneymaker - I'm assuming by your question that you feel many are scared now or likely to be in the near future?. Can you expand on what you think people may be scared of?

I've thought about having gold as a hedge against the US going into really serious financial or social turmoil,....but decided that the risk of such an event was low enough I wouldn't apply savings to protect against it. At the moment, I don't see anything going on that I would have classified as serious enough financial or social turmoil to get me wishing I had a gold hedge and thus my question.

 

[gerntz]

Looking at the numbers I don't see Au as giving inflation protection. It's uncorrelated and loses money over the long term.
Forbes Welcome

Why not TIPS then, or indeed equities?

To each his own obviously.

Yes, to each own.

I don't see how you conclude it loses money over long term when Au was $35/oz when allowed to float around 1975. I'd rather have $1200 than $35.

As I said, it's a form of cash, not an investment. Money markets are the closest thing to holding cash $ that I know of.

I have no idea what TIPS compound interest rate have been since their inception to know if I'd like TIPS. My bond holdings are mainly munis & short/medium funds.

 

[VFK57]

This is very balancing article on why China is building it's Gold reserve and should you keep at least small portion of your assets in Gold. The author surely is not a so-called Gold bug: Why China is loading up on gold - Business Insider

 

[Totoro]

How sure you are that high inflation is not possible here?

Not saying it is not possible in the US. In fact it is quite likely it will happen eventually. I'm just unconvinced personally that gold is your best protection here.

More generally, what I am struggling with is gold as being the best alternative for protection against certain tail risks.

In case of the Weimar republic or Russia or Zimbabwe, yes gold gives you a short term survival advantage. The advantage here is that it is portable and value dense. Note that you need to hold physical gold. And depending on the exact context, you would still lose a very large amount of the wealth. Trading 1k worth of gold for bread will not get you 1k equivalent in bread. In addition you are exposed to theft, robbery, and shakedowns.

Going down the list of some tail risks:

• The country you live in collapses, enters hyperinflation, rest of the world is fine but rule of law prevails: Better of with international equities, bonds vs. gold.
• Rule of law doesn't prevail: Emergency cash needed to escape the country. Here gold is useful, just like diamonds, non-perishable foods, guns and ammo. You may lose it all anyway, but its harder to disown physical items.
• Several major countries collapse: better off having farmland in a peaceful corner vs. gold, and an emergency escape plan (like an airplane fueled up and ready to go at all times). A barrel of oil may do you more good than 5 bars of gold.
• World ends: no need for anything.

 

[Totoro]

I don't see how you conclude it loses money over long term when Au was $35/oz when allowed to float around 1975. I'd rather have $1200 than $35.

I worded too strongly, you are right. Chart here with real current prices:
Gold Prices - 100 Year Historical Chart | MacroTrends

It all depends on the entry and exit point. Point is that gold swings wildly, and has little to do with inflation.

The bottom in 1970 was 200 USD. Gold is a fine investment regardless almost of the time frame.

The peak in 1980 was 2000 usd, almost ten times as much. Strong inflation in the 1980s, and down you went to below 400 USD.

Whatever inflation does, gold is not correlated with it. So if inflation is your worry, find another investment to protect against it.

 

[Fermion]

The mining company I mentioned on here whose bonds were trading at 20% of par at the beginning of this year and had a coupon of 12.5% just got bought out. The buyout includes paying off all bonds at 100%, including accrued interest.

I at one time had $100,000 face but I sold them all this spring for about 50% of par. @#$@

 

[VFK57]

The mining company I mentioned on here whose bonds were trading at 20% of par at the beginning of this year and had a coupon of 12.5% just got bought out. The buyout includes paying off all bonds at 100%, including accrued interest.

I at one time had $100,000 face but I sold them all this spring for about 50% of par. @#$@

In 2008 financial crises our investment condo lost almost 50% of it's value. Yet 8 years later it is not only regained everything but added 20%. Rent went up 45% (some people still believe that we are at 1% inflation as Government states). Currently my worst performed investment is POT, lost us over 20% but I still prefer to sit on it. Inflation may push all prices higher.

 

[gcgang]

?.. Currently my worst performed investment is POT, lost us over 20% but I still prefer to sit on it. Inflation may push all prices higher.

And with POT, you can just smoke it and get higher.

 

[VFK57]

And with POT, you can just smoke it and get higher.

Good advise but I prefer hard liquor.

 

[COcheesehead]

Bought some RING this morning. Currently stands up 1.37% in just a couple hours.
I think gold and gold related stocks will rise at least through the 3rd quarter, but that is just based on the 3rd quarter of election years usually being the worst for the market.

 

[RobLJ]

It's (FSAGX) now up 106% YTD, so it's probably about time to sell 20-25%.

I bought GLD in early '07 in DW's rollover, fearing a crash, then sold in '09 and '10 for almost an 80% profit, wanting to purchase stocks in her account.
My main account was holding cash (twice the allocation), so I placed the equivalent of DW's GLD in FSAGX (Fidelity Gold Mining fund) and eventually doubled the amount over the next two years, since the ostensible allocation was about 5% in commodities (half in PMs); the thesis was that the miners generally move 2-4x the gold price, so FSAGX was leveraged PM.
The miner fund went up for a year or two, then started sinking in 2013 and 14, about 55% down, when I took some stock gains and added another 25% position, then it sank another 17% in '15.
Now it's up almost 75% YTD, and I'm about even since 2006, if you factor in the original position in GLD. I considered putting a little more in in January, but since I was down about 1% in the total portfolio in 2015, I didn't have a lot of gains to take, other than some bonds I wanted to keep.

So the miners are uncorrelated, but a wild, wild ride. GLD or SLV are similar but not quite as exaggerated.
Take of this what you will. It's a small percentage of the portfolio, which raises the question whether it's even worth bothering.

On the other hand, right now it is a sizable percentage of the ytd portfolio gains, which is similar to my experience with biotech and health, although I overweighted them at a considerably higher weight than FSAGX but thankfully harvested gains from 2012-early 2015, to the point that the gains in shares sold are almost 2x the current position. Should the FSAGX run continue through the year, I'll probably take 20-25% off the table.

 

[Koolau]

The small amount of physical gold (and silver) I have, I bought when it was quite low in price. Gave up some paper gains in the stock market to do so, obviously. But, back in the recent "unpleasantness", my PMs kept me more than even as my stocks plummeted. That's reason one to hold 3 to 5 percent gold. It correlates with virtually nothing on a consistent basis, BUT it often smooth portfolios when the going gets rough. Second reason to hold PMs is similar to having insurance. If you never use it, you "loose" but are happy to do so. Agree that for "normal" inflation (the only kind we on this forum have ever seen in the US) gold might or might not help. But during hyper-inflation it has always helped folks (as pointed out by others here.) It may also be good for WTSHTF. Suggest minor investment in "consumables" for the same potential (booze, flour, sugar, cooking oil, cigarettes, etc.)

Oh, by the way, in the 6 months+ since this thread opened, AU is up 30% (by my cranial calculator.) I just threw that in since it's a bad reason to invest in PMs. Of course, YMMV