Gold

[Running_Man]

Why not take 1980 to 2020 and make the comparison between gold and the S&P? Why not go back 50 or 60 years and look? It's easy to cherry pick time frames and say this beat that.

1980 - 2020 SP500 (dividends reinvested) up 74.7x.
1980 - 2020 Gold up 3.17x ($594 to $1885)

Because two of the posters on this thread were commenting on another thread that over 20 years gold only returns inflation returns. I notice you don't go back another 5 years where Gold would be up 45X from that level. Gold goes up and down and is a great contra asset. I did not cherry pick any time frame. It is not an investment for every investor mind, certainly may not be a "no-brainer investment" so I can see where some are not suitable for investing in this asset class

 

[Koolau]

I have always been amused that we seem to have this discussion every year or two. Not much changes.

I would never try to convince anyone else that gold belongs in their portfolio. It's worked well for me over the past 20 years since I've included it. I have found it to "smooth" the ride better than anything else but that's my experience. (I've seen lots of treatises suggesting 3 to 5 percent gold DOES indeed smooth the ride most of the time, but I don't guarantee it.)

I always chuckle when folks say "you can't eat gold." While that's certainly true, it assumes there's only one outcome of TSHTF. Usually, THSHTF looks more like 2008 USA than 1920's Germany - and even then, gold was KING. So if anyone can think of a time when folks had handfuls of gold but still went hungry, please let us all know.

So, let's just leave it at this: Of all the fiat currencies ever printed, how many do we even remember. Pound Sterling, USD, (French Franks don't count - don't get me started) Euros? Right. I'm sure some folks here know of maybe 10 currencies that existed for their entire lives but gold has been money before written history began. It still is. It will be long after dollars and DMs and FFs and SFs, etc. are no longer memories. I would suggest that earns it some respect even if not a place in the AA. Just a thought 'cause YMMV.

 

[big-papa]

Because two of the posters on this thread were commenting on another thread that over 20 years gold only returns inflation returns. I notice you don't go back another 5 years where Gold would be up 45X from that level. Gold goes up and down and is a great contra asset. I did not cherry pick any time frame. It is not an investment for every investor mind, certainly may not be a "no-brainer investment" so I can see where some are not suitable for investing in this asset class

One of the best ways I've seen to compare any two assets (or two portfolios) is the tell-tale chart. It's simply the cumulative returns of one asset divided by the cumulative returns of another asset over time. So instead of directly looking at returns over any particular timespan, you can see how an asset outperformed another (as indicated by a positive slope) and how it might have underperformed (as indicated by a negative slope) over time. Yep, there are some assets (stocks relative to bonds, for example) where the overall slope trend is positive, with some occasional bumps. But you might be surprised when you compare other assets.

By the way, the Simba Spreadsheet over on bogleheads already includes this capability and has tons of different asset types built into it (including Gold), if you're interested. The data is currently through 2019, but the current owner will update it this month to include 2020 data and final inflation numbers (once they become available around mid-month). So might be helpful for those who consider gold as a diversifier in a portfolio. Not so much, if you consider gold only as a "Plan B".

Note: this is just one tool among many when evaluating relative performance of assets and creating a portfolio. Also the usual past doesn't guarantee future, yada yada yada..

Here's the wiki: https://www.bogleheads.org/wiki/Simba's_backtesting_spreadsheet

Here's the post on their forum where the latest version can be downloaded:
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=2520&p=5382859#p5382859

Cheers.

 

[gooddog]

I have found that over the last several years that the NZ ETF ENZL (which has Australian companies too) has been a very good inflation hedge. NZ has a commodity backed currency, and no real issues.

 

[triangle]

Ok, I am not a believer. Why? Because I keep hearing people telling me on TV that I have to buy gold because the devaluation of the dollar (inflation hedge). Yet the people selling gold are taking those dollars in exchange so that blows the lid off the entire idea to me.

Looking for sensible people to weight in.

I think that logic is unreasonable. Using that logic why would people buy/sell stocks, trade bonds, real estate, foreign currency, etc. The people making a market in a commodity are usually making a small profit whether one is buying or selling. They will take they dollars they gain from a sell and buy or invest in other things, perhaps even invest in a literal gold mine.

I see gold as a long term inflation hedge or for those more fearful as protection against fiat money implosion. But I do not like gold as an investment since it is not productive and taxes eat away the "investment".....meaning after some years when the price of gold has increased to reflect currency devaluation that difference will be treated as income. The Federal Reserve and congress can take their "share" with controlled inflation.

 

[samcat]

We are invested in a goldmining mutual fund. BGEIX - American Century Global Gold Fund. We were once up over 100% but now up 61%. Yesterday, when the market tanked, we were up 7%. All since April 2017.

 

[imnontrad]

> I keep hearing people telling me on TV that I have to buy gold

This is because they are selling gold and it is profitable enough that they can pay for TV ads.

 

[maestro]

I think I'm 'sensible'...I say short Bitcoin at 34k.

 

[smihaila]

Can’t fault your logic. It sounds like the advertisers/sellers do not have a high degree of confidence in the inevitability in its rise in value. Otherwise they would hold onto it themselves.

Not necessarily, it may be an aspect as simple as ... a profit margin: they may buy the gold at lower price, and sell higher. Out of that profit, they could either buy another gold to keep for themselves, or other assets as you mentioned.

 

[mickeyd]

I have no interest in investing in gold, but I very much enjoy viewing Parker and Tony and Dave and all of the other guys/gals doing gold mining on Discovery Channel.

 

[MichaelB]

DW is a big believer in gold. Not paper certificates, the pliable stuff, 18k. She always has some with her and has never objected to having a bit more.

 

[Koolau]

DW is a big believer in gold. Not paper certificates, the pliable stuff, 18k. She always has some with her and has never objected to having a bit more.

Heh, heh, my DW has always been a skeptic about almost ANY "investing" other than CDs or bank deposits. I finally talked her into (and then BACK into) pssst, Wellesley - another story. BUT, give her a gold bobble on a gold chain and she is in heaven. A good proportion of my hold-it-in-your-hand gold investment is tied up in .75 (18 ct) chain with various denominations of gold coin dangling from it. It's true that jewelry carries a higher premium than even bullion coins or bars. BUT, I always know the gold prices going in and have found dealers who work on lower margins - especially with used items.

DW calls it jewelry but I call it stealth investing. YMMV.

 

[TDB622]

I look at it this way.
Gold is an insurance policy, just keep enough of it around to be the equivalent of 1 years worth of living expenses. You can do this easily with a non country based storage company like GoldMoney. OneGold or Guild Hall Wealth. Your holding is international, and you can get to it from anywhere with an internet connection.

Consider this : If you were a citizen of Venezuela in 2010 how much better off would you be if you had just $10 or $20 K of gold or silver that was accessible and transferable into 8 other currencies? Particularly when you woke up on a Monday and all your savings were suddenly worthless. This could happen to any country. It could buy you 6 months or a year to get through some unrest or to make a plan to leave for you and your family.

 

[Koolau]

I look at it this way.
Gold is an insurance policy, just keep enough of it around to be the equivalent of 1 years worth of living expenses. You can do this easily with a non country based storage company like GoldMoney. OneGold or Guild Hall Wealth. Your holding is international, and you can get to it from anywhere with an internet connection.

Consider this : If you were a citizen of Venezuela in 2010 how much better off would you be if you had just $10 or $20 K of gold or silver that was accessible and transferable into 8 other currencies? Particularly when you woke up on a Monday and all your savings were suddenly worthless. This could happen to any country. It could buy you 6 months or a year to get through some unrest or to make a plan to leave for you and your family.

I can't fault your logic, but am not familiar with the non-country storage. I guess I'm assuming the US will more-or-less (in my life time at least) still be tenable. Therefore, I like a handful of gold and a bucket of silver "just in case" (and I'm not too specific about the "case"). I DO agree completely with thinking of gold as an insurance policy (heh, heh, with CASH value - all you term policy geeks - take that!) I guess that's why I personally do not demand that it keep up with the DOW or S&P or any other index.

Gold has several potential rolls. It's a store of wealth that, over time, keeps up with inflation, adds stability to a portfolio because it generally doesn't correlate with either stocks or bonds (okay, not too often or for too long), it has ITSHTF capabilities (still,no one has refuted this except to suggest you can't eat it - actually, you CAN! https://www.slofoodgroup.com/collec...gold leaf&utm_content=Ex - Edible Gold - Leaf ), it's transportable, weighing less than equivalent $50 bills, you can wear it, etc. SO, if it doesn't earn interest or out pace the indexes, perhaps for a few of us it's other properties (I forgot, nothing shines like gold - they put it on windows and satellites to reflect the sun's IR) make it worth having a fistful or two.

More than most subjects, YMMV.