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Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 07:51 PM   #1
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Not to throw gold bricks at the hornet's nest, but...

There is a paper in the March/April issue of Financial Analysts Journal titled "Do Precious Metals Shine? An Investment Perspective". I haven't had time to do more than skim it, but the authors appear to have concluded that a modest weighting of gold improves the efficiency of an equity-heavy buy and hold portfolio because gold performs very well in times of high equity market volatility (i.e. when the sh!t hits the fan). They seem to think that you do even better buy buying gold as volatility picks up and selling when it calms down because gold basically lays there and does nothing when things are plodding along as normal.

Of course, the current situation of near record low equity volatility combined with surging gold prices kind of stands all their careful work on its ear...
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 07:56 PM   #2
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Re: Not to throw gold bricks at the hornet's nest, but...

Quote:
Originally Posted by brewer12345
There is a paper in the March/April issue of Financial Analysts Journal titled "Do Precious Metals Shine? An Investment Perspective".*
Brewer, thanks for the citation. Is this available online, or only at a library?

Ha
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 07:59 PM   #3
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Re: Not to throw gold bricks at the hornet's nest, but...

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Originally Posted by HaHa
Brewer, thanks for the citation. Is this available online, or only at a library?

Ha
Here is the link: http://www.cfapubs.org/toc/faj/2006/62/2

Looks like they want you to pony up $15 for a download. I get the hard copy because I am a member of the CFA Institute.
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 08:08 PM   #4
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Re: Not to throw gold bricks at the hornet's nest, but...

Considering the emergence of gold ETF and the "normalization" of gold as an investment vehicle, I wonder how much we can really trust historical analysis of how gold used to trade. I think many of these alternative asset classes, commodities, REITs, etc. are going to exhibit a much higher degree of correlation with other asset classes then they have historically.
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 08:16 PM   #5
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Re: Not to throw gold bricks at the hornet's nest, but...

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Originally Posted by 3 Yrs to Go
Considering the emergence of gold ETF and the "normalization" of gold as an investment vehicle, I wonder how much we can really trust historical analysis of how gold used to trade.* I think many of these alternative asset classes, commodities, REITs, etc. are going to exhibit a much higher degree of correlation with other asset classes then they have historically.
Hard to tell. With gold, I suppose that could be true since there seems to be a LOT of speculative capital focused on a narrow market. Commodity futures may be a little different simply because there is a large volume of producers and end users who really do fundamentally need and want to be in the markets to hedge their risks. Unless the huge pension funds really do put a ton of money into the futures markets, it is hard to imagine that investors would out weigh the natural players in the commodity markets. But it is certainly conceivable.
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-14-2006, 09:29 PM   #6
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Re: Not to throw gold bricks at the hornet's nest, but...

Ha -

You could read the hard copies for free at UDub. Just about every major univeristy carries it and that is where I used to read mine.
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-15-2006, 06:50 AM   #7
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Re: Not to throw gold bricks at the hornet's nest, but...

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Originally Posted by 3 Yrs to Go
I think many of these alternative asset classes, commodities, REITs, etc. are going to exhibit a much higher degree of correlation with other asset classes then they have historically.
I read recently that this increased correlation is underway (no, I don't remember the source) ... which doesn't necessarily mean that will be the case over the long term.
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-15-2006, 10:32 AM   #8
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Re: Not to throw gold bricks at the hornet's nest, but...

I would expect a pullback to the $540 range, then a gradual climb to the $800 range.

My opinion only, but Gold will relect the decreasing exchange rate of the US$, the more it declines, gold will appreciate to reflect this.

Gold is Oh S%^t Insurance, you don't want to collect it, but you must have some, 10% is the accepted correlation, of investable Assets.

I own XIU/TSE which contains gold producers, so my exposure is somewhat less, although we do have several Gold Chains of 24 KT bought in Saudi Arabia, year ago.(Yes they break easily, that is why they sit in a case).
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-15-2006, 10:38 AM   #9
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Re: Not to throw gold bricks at the hornet's nest, but...

Quote:
Originally Posted by 3 Yrs to Go
Considering the emergence of gold ETF and the "normalization" of gold as an investment vehicle, I wonder how much we can really trust historical analysis of how gold used to trade. I think many of these alternative asset classes, commodities, REITs, etc. are going to exhibit a much higher degree of correlation with other asset classes then they have historically.
Thats my take. As per our recent "gold" discussion, I dont see that gold has done anything predictable since the late 70's. It sure as heck didnt come to the rescue during the recent bear market in equities.

Looking at this chart, where we've had wars, bulls, bears, high inflation, no inflation, the fall of communism, etc...nary a signficant twitch from the late 70's until the last few years. And nothing to point to in the last few years that can be pointed to as causative fo the current run up. Except for what MIGHT happen. :P
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Re: Not to throw gold bricks at the hornet's nest, but...
Old 04-15-2006, 12:41 PM   #10
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Re: Not to throw gold bricks at the hornet's nest, but...

about the closest link i could get gold to follow consistantly was oil.....not as volatile but except for 1 period i think it followed it pretty close
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