there is no 'basically' with gold and that's why it's universally viewed as the ultimate safehaven. there is risk you won't get your money back when holding treasury bills and that risk is impossible to judge so many years in advance (particularly if the underlying currency becomes debased).
Fair enough. If you want to live your life collecting gold in case the US no longer exists in the future, that's certainly your choice. But as far as the actual value of the dollar - the whole issue that started the discussion - it's not spiraling down in value and holding dollars over the last 100 years would have proven a far better store of value than gold. And it likely will going forward, unless the US collapses, in which case the world economy likely also collapses and our problems will run much deeper than how much gold we might or might not have. And you still haven't explained why, unless you're living paycheck to paycheck, it's stupid to base your financial decisions on the actual real buying power of your money as opposed to how much gold you can buy based on the whims of the gold market, which you admit does not always move rationally or based on currency valuation.
Since you mentioned it... it typically takes two full-time workers to provide for a 2 child family. 100 years ago you only needed 1 breadwinner.
Just flip it and it makes more sense. "Because it's viewed as the ultimate safehaven, it has the perception that it has no risk". Gold is almost a non-productive commodity that people value simply for historical and the "oooo shiny" reasons. A barrel of oil is more productive than a bar of gold but gold is still worth more due to the illusion of safety.
Commodities have never been a great store of value especially after major price spikes. Gold is still a commodity even though people are trying to price it as if it is a full fledged currency. You reference 6000 years of history for gold being viewed as a currency and I accept that. But the fact is the dollar and US economy are still king and despite the panic with gold and silver. That being said...gold in inflation adjusted prices is not cheap if you look at the past 700 years. If anything it's status as a safehaven at these price levels should be brought into question for a long term investor who has no intention of selling. The trend is still clearly bullish for the near term, but farther out you have to question it's ability to hold this price level. The chart is not up to date for the past couple years, but it does give a good historical reference point. Spoiler for size.. Spoiler And a fun one for silver too Spoiler And why not throw up a trade weighted dollar chart too Spoiler
wrong i did not say this. i did not say move because gold does not move, it is fixed. i said it's a barometer (ie indicator) of fear when it takes more currency to obtain a given quantity of gold.
I just figured you were posting so early this morning cause of terrible sleeping habits like me:grin:
This isn't true - everything moves. If people want more gold, they will be willing to pay more for it. Like anything else, it's driven by supply and demand. Forget other paper currencies since you've decided there's no legitimacy to that - the price of gold measured in silver changes on a day to day basis. Both of them are fixed hard currencies, and yet their relative valuation changes.
This is possibly the stupidest time to buy gold. Gold prices have shot up dramatically and you want to buy in now? Gold is still a product of supply and demand and consequently inflation. Enjoy your terrible return on that investment because of currency paranoia. I mean unless you live in Zimbabwe where your currency really was so horrible that its more or less phased out today doing something like this is silly. Gold is affected by the same market forces as everything else and right now is an awful investment. There are plenty of other things to invest in. And honestly if you are that paranoid about the dollar then go buy some other currency that you think will appreciate to the dollar (which according to you is probably every currency since the dollar apparently might fall over soon)
Yeah, people should buy things that are going down, like the US dollar, treasuries, and housing, right? Just because it's gone up a lot doesn't mean i won't go up even more. And I doubt it's going up just because of currency paranoia. There are other demand factors at play.
The currency cratering might be the best thing for America. It devalues debt. It makes US products more appealing since exports will go up, which in return will bring jobs. The only problem is that 6 dollar gas and high food prices. Who it really hurts are the poor and elderly which might be the republican plan.
This is simply a fundamental misunderstanding of the gold market. In fact the opposite is largely true. India for example is 1/4 of the global gold market by itself. Gold isnt bought as a hedge against anything. It's bought because Indians are crazy and buy tons of gold for jewelery. (I can speak from personal experience on this one) Rises in gold purchases in India are a sign of economic growth, not fear. Gold Jewelery is purely a status symbol there. The large spikes in gold prices correlate very well with the growth of the Indian economy. The same is also true in China to a lesser degree (the #2 gold buyer in the world) And unlike the US, the middle class in India and China were largely unaffected by the recession. They bounced back much quicker than the United States. Now that isnt to say the fear is irrelevant. But not for the reason you cite. No one is buying gold because of currency fears. People buy gold because confidence in the markets is down. People perceive it as a "safer" investment than a bear market. So in addition to the economic growth of places like India and China, you find people who buy gold due to fears about the stock market. In fact a lack of confidence in the markets does correlate fairly well with a rise in gold prices. But the largest impact on gold prices is not fear, its jewelery and that has consistently been a sign of economic growth rather than fear. Additionally I think something like 80% of all gold produced is for jewelery and industrial equipment. (areas that are affected purely by market forces) Of that 20% some of that goes to central banks, some of that to speculators, exchange funds, etc... In short fear has an impact but that isnt the sole reason why gold prices have grown.
UT endowment fund took delivery of $1 billion in gold last week, which would put that at about 5% of the fund. Not debating whether it is the right or wrong move, but interesting nonetheless.
I can sort of understand it. When i say its a stupid investment I mean its a bad investment in comparison to other options that you have. You can make an absolute killing in the stock market right now. I'm a novice investor at best but I've had some pretty good fortune with my retirement account since 2009. Endowments and pensions on the other hand aren't looking to take risks like I have. So in that sense gold can seem more stable especially if you feel there's enough uncertainty in the market to be afraid. I just think individual investors shouldn't bother with gold as a hedge. There are far better ways (while being just as safe) to make money than gold. I realize that some people are just really risk averse so if that's your cup of tea then I guess have fun with gold.
This isn't quite accurate. Technically, they switched from gold futures to actual gold, but that's more of a logistical thing. They've been buying gold since 2009 at much lower prices and now have a total of $1 billion of gold in their portfolio: http://www.cnbc.com/id/42682491 "We began buying gold in September of '09 at about $950 dollars an ounce, our average price is about $1,150, we've invested around $750 million dollars in gold over that twelve months and now it has a market value of around a billion dollars," Bruce Zimmerman, chief investment officer for UTIMCO, told CNBC Wednesday. Gold represents 5 percent of UTIMCO's portfolio. They are doing it as part of their investment strategy, as gold is a commodity to profit on, just like stocks, bonds, or other commodities.
This would affect the elderly who rely on savings to survive, but the poor wouldn't be hit as hard as those who have a lot of money saved at relatively low interest rates, such as people with a nest egg who are nearing retirement. People like me with a lot of student loan debt will make out like bandits once that debt becomes seriously devalued.
i keep reiterating that gold is money, not a commodity....and until you accept this reality it will perplex and confound you to no end as to why capital gravitates to it :grin: regarding the safehaven status, if you have serious equity then your chief aim is capital preservation. you're not concerned as much with mickey mouse rises and declines as you are with basically staying wealthy and making sure your grandchildren's grandchildren are as well. so risk is what you look out for, including the real risk of currency debasement. ie. the value of gold in terms of dollars holds less importance to you than the possibility of dollar extinction altogether. that first chart, not sure how accurate that extrapolation back in time to pre-american days can be
i don't really agree that silver is money like gold is. in fact one of the most followed stats in the precious metals business is how many ounces of silver it takes to buy one ounce of gold. the historical # is about 18, while it's currently about 35.
