Gold?

[Hamlet]

It's pretty obvious that this is is not entirely true.

You could buy gold for like $300/oz around the year 2000. Today it costs over five times that. The purchasing power of the dollar has not been reduced by 80% in that time.

The double cheeseburger that was on the dollar menu in 2000 has crept up to about $1.30, but it isn't $5. A car that was $20k in 2000 might be $30k today, but it isn't $100k.

Pure speculation plays a huge part in gold's fluctuations in value. In the last decade speculation has played a larger role in it's value than inflation has, IMO.

I consider that the value of gold doesn't change. It is the value of the fiat currency that it is denominated in ( currentlyUS$ ) that changes. As the dollar gets weaker via inflation, it takes more to buy an ounce.

 

[Lazarus]

Warren Buffett on Gold

He prefers to invest in income producing assets.

Here's What Warren Buffett Says About Gold and Commodities (NYSE:BRK.A, NYSE:BRK.B, NYSE:XOM, NYSEBA, NYSEBC, NYSE:GLD, NYSE:XLE, NYSE:USO) | Wall St. Cheat Sheet

I think Gold and Silver might be better viewed as insurance and a kind of emergency liquidity store. But there could be circumstances where no one would want the gold any more than the paper money.

If you were starving you would not trade your can of beans for a brick of gold for example.

I think its difficult to store value for the future in any secure way. There is risk in everything.

I have a little silver myself, but it is a small part of my NW.

 

[Sparkie67]

It's pretty obvious that this is is not entirely true.

You could buy gold for like $300/oz around the year 2000. Today it costs over five times that. The purchasing power of the dollar has not been reduced by 80% in that time.

The double cheeseburger that was on the dollar menu in 2000 has crept up to about $1.30, but it isn't $5. A car that was $20k in 2000 might be $30k today, but it isn't $100k.

Pure speculation plays a huge part in gold's fluctuations in value. In the last decade speculation has played a larger role in it's value than inflation has, IMO.

I agree to a point. But I also think that true inflation has been kept out of the general economy and funnelled into other 'bubbles'. Cheap debt for property for example, or the current bond bubble. Once a country like China decides is doesn't want to hold so much US debt, the flood of dollars into the economy will show the true level of inflation. It's all conjecture, but for me, it's worth having 5% of my net worth in gold. Just incase I'm right. If I'm wrong, it's still shiny

 

[imoldernu]

Warren Buffett on Gold

He prefers to invest in income producing assets.

Here's What Warren Buffett Says About Gold and Commodities (NYSE:BRK.A, NYSE:BRK.B, NYSE:XOM, NYSEBA, NYSEBC, NYSE:GLD, NYSE:XLE, NYSE:USO) | Wall St. Cheat Sheet

I think Gold and Silver might be better viewed as insurance and a kind of emergency liquidity store. But there could be circumstances where no one would want the gold any more than the paper money.

If you were starving you would not trade your can of beans for a brick of gold for example.

I think its difficult to store value for the future in any secure way. There is risk in everything.

I have a little silver myself, but it is a small part of my NW.

Re: gold as emergency liquidity... yes, and possibly more...
Situations change...what was right in 2011, may not play as well in January 2013.
Understanding the consist of bank assets and the effect of deleveraging might even affect Warren Buffet's view today.

This article explains the dangers inherent in re-hypothecation. MF Global and the great Wall St re-hypothecation scandal
Hopefully none of this will come to pass and it will be unnecessary to even consider the possibility of a need for liquidity... (again, the goal of the Bernancke plan) but understanding the underlying repo and hypothecation could give a leg up on any major market move. MF Global offered some insight on the potential problems.

 

[martyb]

In 2001, gold was $275 per ounce, and I was buying/selling silver bullion, which at the time was spot priced at something like $4 per ounce. I remember thinking "hell no, no way I'm paying $275 for a one ounce gold coin!" lol

Oh well............

 

[brewer12345]

I think Gold and Silver might be better viewed as insurance and a kind of emergency liquidity store. But there could be circumstances where no one would want the gold any more than the paper money.

If you were starving you would not trade your can of beans for a brick of gold for example.

I think its difficult to store value for the future in any secure way. There is risk in everything.

I have a little silver myself, but it is a small part of my NW.

In most of the circumstances people mention wanting to have gold for, I would rather have a cache of shotshells and MREs. Guess what I have instead of gold?

 

[imoldernu]

A visual on who owns and where the world's gold is:

Gold - Visualized in Bullion Bars

 

[omni550]

I recently attended a presentation by a financial planner. He passsed around this bar of gold worth $58,000.

I set it down on one of those 5" sq. cocktail napkins (to give a sense of scale), to take this photo...


omni

 

[REWahoo]

I recently attended a presentation by a financial planner. He passsed around this bar of gold worth $58,000.

Let me guess - it was his, not his clients...

 

[omni550]

Let me guess - it was his, not his clients...

Yes, you guessed correctly!

omni

 

[ratto]

$5800 is about 108 grams gold. That translates to about 5.613 cc/cm3, or a cube about 1.777 cm each dimension. If they could get hold of a real gold bar at 28-30 pounds, then someone probably would get their wrist/foot hurt by passing it around.

I heard that some investors even have already distributed their physical gold holdings across multiple vaults in different geographic locations to reduce their risk. Go figure who is capable of and will be trying really hard to go after those gold bars during crisis. About a country's official gold reserve figure, how can it be independently verifiable by other sources/countries, or it's better not to open this Pandora's box?

 

[jon-nyc]

I had a brief professional relationship with the NY Fed. They once gave me a private tour of the gold vaults. Part of the tour was holding one of those gold bars. They give you metal clog like things that go over your shoes to make sure you don't hurt yourself.

Before they handed me one of the gold bars, they warned me it would be heavier than I was expecting. Even with that warning, it was much heavier than I was expecting. I then understood why I had to wear the metal clogs.

 

[imoldernu]

For those who may be interested in gold as pivotal part of the economy, this article may be interesting. It details the movement of gold from the NY Fed to the German Bundesbank.
Bundesbank to repatriate gold from Paris and NY - The Local
The link to visual representation of physical gold (in a previous post) shows the dichotomous relationship of liquid asset location to trust in international banking.

This movement of physical gold is the first in some time. It should be interesting to see if the coming year will see more of this rebalancing.

 

[Texas Proud]

A visual on who owns and where the world's gold is:

Gold - Visualized in Bullion Bars

Interesting..... and I can see they had a young person proof the copy... from the site...

"This is how much Gold the average man could haul in his truck without braking the suspension"


I have seen this many times where they use the wrong break...

 

[Lazarus]

Is there any point in having a gold reserve since the dollar is not tied to it now?

 

[REWahoo]

Is there any point in having a gold reserve since the dollar is not tied to it now?

I think it's there so the Pres can have some way to buy cigarettes if the fit really does hit the shan.

 

[Ed_The_Gypsy]

Question from a very unsophisticated potential investor.

Am 100% risk averse, but have been getting some "feelings" from friends, and a few goldbug websites that owning physical gold may be a good hedge right now.

Would like to hear some thoughts from those who know about these things. Mainly, safety... thinking four or five years out.

IMH) You gotta be nuts.

 

[traineeinvestor]

Like others, I have difficulty investing in treating gold as a mainstream investment becuase of its lack of measurable fundamentals. That said, we have a few ounces tucked away in a safe deposit box "just in case" and a larger but not material investment in paper silver which was made in an attempt to diversify our portfolio somewhat.

I have recently opened a position in platinum.

 

[HFWR]

Like others, I have difficulty investing in treating gold as a mainstream investment because of its lack of measurable fundamentals...

But it's shiny!

 

[FIREd]

But it's shiny!

And nobody should underestimate humans' attraction to shiny things...

 

[wingfooted]

Question from a very unsophisticated potential investor.

Am 100% risk averse, but have been getting some "feelings" from friends, and a few goldbug websites that owning physical gold may be a good hedge right now.

Would like to hear some thoughts from those who know about these things. Mainly, safety... thinking four or five years out.

Some of your net worth in physical precious metals is not a bad plan.

Personally I have about 1% of my liquid net worth in pre 1933 gold coins and bags of Mercury Head dimes / Walking Liberty halves. Would like to gradually move that to 2%. There is just a comfort feeling in holding real money in your hand. Paper bills , bank statements, brokerage numbers as they update in real time on your computer - just too abstract a value concept.

 

[brewer12345]

Some of your net worth in physical precious metals is not a bad plan.

Personally I have about 1% of my liquid net worth in pre 1933 gold coins and bags of Mercury Head dimes / Walking Liberty halves. Would like to gradually move that to 2%. There is just a comfort feeling in holding real money in your hand. Paper bills , bank statements, brokerage numbers as they update in real time on your computer - just too abstract a value concept.

I'd rather have shortstops.

 

[imoldernu]

I don't guess that anyone would be interested in this blog about gold, and the world economy, but am leaving the link here... to perhaps return to a month or three from now...
It's just a blogger's view of gold.
A new Gold Standard is being born – Telegraph Blogs
The guy makes sense to me, but talk is cheap.

 

[ratto]

Thanks for sharing the blog. Gold is worth not too much all by itself, but it serves special and important role because it can not be easily QEd just by punching extra zeros via computer keyboard. Like the blogger said:

A third reserve currency is just what America needs. As Prof Micheal Pettis from Beijing University has argued, holding the world’s reserve currency is an “exorbitant burden” that the US could do without.

 

[Koolau]

<SNIP>

"This is how much Gold the average man could haul in his truck without braking the suspension"


<SNIP>

Taking this 90 degrees to the right (or left depending upon your chiral affinity): With gold at about $1700/(t)oz, your same truck could cart around about the same weight in US$50 bills. Only problem is not everyone recognizes (or accepts) US currency and your truck would be bulging with bills instead of it's floor being lined with "celestial paving stones". This is all in the FWIW department, so YMMV - and be sure to check your breaks (er, brakes) even for the "Grants".