Gold as Safety

[LRS]

LRS:  But you just remembered an interesting story about your father and family.  That's always nice--and worth more than a tin of silver.

All the things I remember about my grandfather make me smile. He taught us kids to play poker "the Maverick way" and while we were playing, he would give us sips out of his big bottle of Robitussin. Yum!

 

[Craig]

Precious metals have been a small portion of our investments for years, and we've enjoyed the stabilizing influence.  We invest a small amount each year here, in Vanguard's fund ... a bit more in coins when the price was depressed.  We cry all the way to the bank when our friends make fun of gold. 

All kidding aside, what goes up, goes down of course, and it is not like an equity or bond investment.  But it reminds me a bit of NOLA, and Katrina ... our good, intellectual friends who made fun of our firearms and belief in the RKBA (right to keep and bear arms) began asking for our suggestions after they watched the dismal performance of 'civilization' during Katrina.

Sometimes, in very dismal markets, this allocation has been one of the few bright spots.  And, it is nice to have something looking good when the news is otherwise troublesome.

To absolutely confirm my 'nutcase' status, we also maintain a small amount of food and supplies in our home.  'Course, these days, the Red Cross and the U.S. government are offering the same advice.  Perhaps not seen as so kooky anymore.

Precious metals are kind of a neat hold for a very small portion of the nest egg, IMHO.  To each his own.

 

[Marshac]

Sometimes, in very dismal markets, this allocation has been one of the few bright spots.  And, it is nice to have something looking good when the news is otherwise troublesome.

I have a bunch of gold and silver 1oz maples I bought in Jan '05- it was pretty fun to watch them increase over 21% throughout the year. My only complaint about bullion investing is that it's not as easy to buy/sell as other assets.... it also doesn't spawn dividends, and a lot of the 'news' you find about it is often written by folks with extreme bias. Regardless, 2005 was a good year for both of these metals.

 

[Craig]

Wow. XAU up 6.3% today.

I love days like this.

I turn the computer off when it goes the other way.

Volatile, but kind of neat, when it's not a huge portion of the stash ... and tends to produce nice numbers when other investments are tanking.

 

[haha]

Wow.  XAU up 6.3% today. 

I wonder if this may have to do with the idea that the Fed has stopped or is very near to stopping its rate hikes. One thing gold loves is negative real interst rates.

I notice that the US$ was weak today also, possibly for the same reason.

Bring it on!

Ha

 

[TargaDave]

I wonder if this may have to do with the idea that the Fed has stopped or is very near to stopping its rate hikes. One thing gold loves is negative real interst rates.

I notice that the US$ was weak today also, possibly for the same reason.

Bring it on!

Ha

Ha,
According to my "gold bug" dad a big driver right now is foreign demand for gold finally starting to come alive. Remember that with the dollar weakening over several years gold was really only gaining against the dollar while remianing flat against many other key currencies. Now gold is rising against all currencies. Why the increase in foreign demand? Pick your reason. Two other key factors are record low mining output (just like oil companies, mines can't increase output as quickly as prices rise and the easy stuff is already out) and big reductions in central bank selling. The "bugs" will argue the central banks don't even have much to sell. One other factor: given a tough situation, Bernanke will choose inflation over deflation.

For those who trash gold as a relic I would say to at least be aware of what is happening even if you never touch the stuff, and not just assume rampant speculation by some "Hunt Brother" types. Americans who live on plastic and mortgages might think gold is a joke but many foreigners (think India, China) treat the metal differently (the same way they hate debt) and they are the only savers. If Asians and Europeans decide to increase even a small portion of their savings into gold instead of US debt (or US real estate / equities or other foreign IOU's) then gold could have much further upside. Yep, a very tough investment that doesn't win often. But,...... until the US government stops abusing the dollar I am happy to hold onto my gold/silver/mining stuff.

 

[haha]

Gold and gold stocks are indeed on a tear right now. I don't believe that gold represents safety at all. It does represent an asset class that can really fly under certain circumstances.

Thus to me it is more of a speculation than an investment, and also not something that I feel comfortable putting a lot of money in. My wife could cope without her gold jewelry a lot easier than she could without her car, for example. And she is a woman who loves gold.

I was out of gold for many years until 1997. Then I bought some and immediately got hosed. I closed most positions at a loss, and hung on to others. In 2002 I bought quite a bit near the bottom, and have sold a lot of that already, perhaps too soon. But anyway it was profitable, and allowed me to recoup my earlier losses as well.

Now, I am down to $100,000 worth of mining stocks, mostly juniors. My cost on these is $55,000. So I am inclined to let 'em ride, since I think we are approaching the sort of situation where the general public can easily get irrationally hot about gold. "Helicopter Ben" is just beginning his shift, and I expect great things from him. In the sense that he has hubris written all over his egomaniacal face- a real Mama's Boy/ Teacher's Pet if there ever was one.

If things go well (well for gold, badly for the country) my stake could easily triple or more from here.

Of course, he may turn out to be Big Paul in disguise, and I get my ass handed to me. C'est la vie!

Ha