The Value of Gold

[Bonkers]

Thanks to HPC and GEI, Ive started to be more pro-active with my money, I want to invest but of course before jumping in and doing some research, my questions as follows...

 

The Value of Gold.

 

I hear alot of people with VI (anyone with a stake in it) saying gold is the way, I would be doing this to If i had brought, But I have been thinking if the "Gold Standard" never comes back. (Hear me out ! )

 

What alternatives would you invest in?

 

I ask this because of 2 reasons.

 

Everyone is ramping gold and although I have not valued gold as being worth risking my money in it, at its current value and also no-one every talks about why gold might not be a good investment at its current value.

 

Iam trying to see both sides of the coin (pardun the pun), but Ive never seen the question asked either, have you?

[drbubb]

"Everyone is ramping gold"

 

I DISAGREE.

There are much few people interested in Gold than there are people "ramping" property:

 

+ Where are the 10-a-day programmes on television?

+ Where are the banks eager to lend anyone 80-90% to buy it?

+ Where are the pubs filled with people talking about how thgey made their fortunes buying gold?

+ Where are the notes under the door proposing 90 ways to buy or sell it?

+ Where are the courses telling you the best ways to trade it (apart from here)

+ Just look at the intellectual arguments in favor of Gold: they are often made by intelligent people using unfamiliar ideas (to most people), while property has become an emotional question of BELIEF, while yields continue to slide

+ Do you even know personally anyone who has made good money on gold yet? I do of course, but I had to seek those people out, and study and work, and take risks to become one of them

 

It hasn't even started yet - the full hype stage. Meantime, Look at property, it STINKS of hype

[frizzers]

Fantastic post, Bubb. But ...

 

Read the gold thread on HPC on the run up to 728. The postings were the frenzied rants of people caught in a bubble.

 

Nevertheless, I believe that was an intermediate bubble in a long-term bull.

 

Property is on another scale altogether. I take my kids to playgroup. All the mums talk about house prices. None, not even their husbands who work in the City, talk about gold.

 

This is a bull market in gold. We might not be seing a good entry point at the moment, but I am sure it is just a few weeks away.

[andrew_uk]

Hi Bonkers,

 

You are right that some ramping of Gold is occuring.

 

I've received spam emails telling me to buy various stocks including gold stocks.

There are lots of 'experts' telling us that gold is the way.

There are websites dedicated to gold & other commodites.

 

But outside of this 'amateur investor' channel of information...

 

Most websites/experts have been saying the same thing for years so they never changed there tune to fit the results, unlike some property experts.

Most investors have no concept of where gold fits into an investment strategy.

I can't buy gold coins from a high street bank.

When I go into a jewellers to ask about investment gold they look confused, even if they have goldsmith over the door.

Newspapers don't print lots of flashy investment articles about gold.

 

I invested during both the dot com mania and the current housing boom mania and the current buzz around gold is not the same. I will admit gold hitting >700 got the heart fluttering but then it dropped like a stone. I don't remember dot com/housing doing that they just went relentlessly straight up or at least semme to.

 

The return of the gold standard is a small chance and is unlikely as it means a fiat money collapse but then anyone with gold would be rich.

 

Gold is a play for inflation. Inflation = increase in mony supply. money supply has gone up a massive amount, later gold should do the same irrespective of GDP, IRs or similar.

 

Other investments:

 

Cash - you can always buy something later.

Japanese index tracker - In case we're all wrong.

 

I'd avoid all clever stuff (CFD, gold funds, shorting the indexes, currency speculation) unless you'd done it before and not lost money at it.

 

just my 2 cents worth.

 

 

PS Gold has gone up more than housing already it's only the leverage and wide ownership that makes it the favourite talking point. Oh and women buy houses not gold.

[GatheringStorm]

I'd avoid all clever stuff (CFD, gold funds, shorting the indexes, currency speculation) unless you'd done it before and not lost money at it.

 

I wouldn't put gold funds into the "clever" category like the others you mentioned. They may be a derivative of gold but for the next few years they will be a difficult way to lose your shirt imho.

 

Unless of course you're the sort who bottles out during periods of turbulence.

 

Look at the charts of the HUI and XAU - gorgeous, and its hardly begun yet!

[Bonkers]

The return of the gold standard is a small chance and is unlikely as it means a fiat money collapse but then anyone with gold would be rich.

 

 

My sentiment exactly why collapse something and erode your purchasing power. (I refer to heavy weights not investors like ourselves.)

 

Gold is a play for inflation. Inflation = increase in mony supply. money supply has gone up a massive amount, later gold should do the same irrespective of GDP, IRs or similar.

I may seem nieve here, but isnt inflation on its way out if everyone is raising interest rates?

 

Cash - you can always buy something later.

Japanese index tracker - In case we're all wrong.

 

I'd avoid all clever stuff (CFD, gold funds, shorting the indexes, currency speculation) unless you'd done it

 

Cash = Good but value will erode if deflation occours.

Japanese Yen/Index = Greastest return/risk

Gold = Value may still be maintained/grow but only if seen as a return to gold standard(But i refer back to Why collapse the Fiat system).

[evilwebby]

The gold/dow ratio tells us that yellow metail is a potential 10-bagger still, although I'll believe it when I see it.. it's still a very good place to have some of your wealth, imho.

 

I DO think gold is hitting the public subconsious. I've heard a few people mention gold as a "hot" investment (and Australian mining stocks) in my circle of friends & acquaintances.. then again, these are the same people who are still BUYING houses, even tho they know prices are likely to come down a peg or two.

 

The semi-smart money *IS* beginning to find its way into gold. Signs:

 

+ "Investing in Gold" appears on page 1 of The Telegraph's business section

+ "Gold hits 25 year high" *headlines* on BBC News 24 back in June 2006

+ Friends don't laugh at me when I say that Gold could potentially treble within a decade

[andrew_uk]

My sentiment exactly why collapse something and erode your purchasing power. (I refer to heavy weights not investors like ourselves.)

I may seem nieve here, but isnt inflation on its way out if everyone is raising interest rates?

Cash = Good but value will erode if deflation occours.

Japanese Yen/Index = Greastest return/risk

Gold = Value may still be maintained/grow but only if seen as a return to gold standard(But i refer back to Why collapse the Fiat system).

 

Hi bonkers,

 

Saying inflation is on the way out with raising IR's not true.

 

Forget the lie that inflation is raising prices

If you read a modern dictionary it will state that fact.

Read an old dictionary and it defines inflation as an increased money supply.

e.g. we inflate (increase) the money supply.

 

Imagine a closed system without savings:

100 people, all get 1$ a year, we produce 100 banana's a year (they rot so only last a year).

bananas are $1 each.

now we inflate the money supply.....

100 people, all get $2 a year, we still produce 100 bananas a year

bananas have now risen from $1 to $2 each as we have increased the money supply 100%.

 

now imagine a closed system with savings:

100 people, all get $1 a year, we produce 100 bananas a year but half the people save there money.

bananas are 50 cents each (50$ was spent on them), 50$ is saved

now we inflate the money supply....

100 people, all get $2 a year, we still produce 100 bananas a year (this year 100$ are saved)

bananas are now $1 each (100$ was spent on them), savings are now 150$

-- at this point imagine how many bananas the savers think they can buy and how many they can actually buy! (150$ of savings at $1 a banana?)

 

I could continue this example adding concepts like GDP growth (e.g. we can produce 100 bananas next year) or interest (savings increase from 150$ to 165$ 10%IR)

 

but I hope you can see a wall of savings starting to appear.

 

now imagine we have a major issue (people worry the price of bananas are going up too quickly e.g. the fear of inflation)

even with money supply growth of $1 per person we'd have 250$ chasing 100 bananas

e.g. they leap to 2.50$ each.

 

This is why banks worry about inflation expectations as if everyone on the planet with money spent it all next year inflation would be 10,000% if not much more as we have a wall of money out there.

 

But the fundemental idea is that if we have a fixed supply (Gold) and increased money supply the price will eventuly go up.

 

Increasing IRs just means that people keep there fiat money savings rather than spend it so in the example above high IRs means peopl save more and the price of bananas keeps down.

 

I hope this explains my previous comments about ignoring IRs in relation to the price of gold.

 

On your other points:

 

Cash does not lose value in deflation only with inflation

Gold will raise in value with inflation so they effectively hedge each other

Japanese tracker is there because if we get neither inflation or deflation then all the extra money supply will push up all assets and I think Japan will go up more than most.

[No6]

The gold/dow ratio tells us that yellow metail is a potential 10-bagger still, although I'll believe it when I see it.. it's still a very good place to have some of your wealth, imho.

 

I DO think gold is hitting the public subconsious. I've heard a few people mention gold as a "hot" investment (and Australian mining stocks) in my circle of friends & acquaintances.. then again, these are the same people who are still BUYING houses, even tho they know prices are likely to come down a peg or two.

 

The semi-smart money *IS* beginning to find its way into gold. Signs:

 

+ "Investing in Gold" appears on page 1 of The Telegraph's business section

+ "Gold hits 25 year high" *headlines* on BBC News 24 back in June 2006

+ Friends don't laugh at me when I say that Gold could potentially treble within a decade

 

Other than on sites like GEI, I come across few people talking about gold, or metals/commodities in general actually. I still come across plenty of people talking about houses and buying. I sometimes feel that I am on a lost cause, until you realise that the above is a necessary step towards the eventual downturn that will come. I try hard not to laugh now when the conversation turns to the property market.

 

...and hell will freeze over before Governments and central banks go back to a gold standard.

[frizzers]

...and hell will freeze over before Governments and central banks go back to a gold standard.

 

Great line, No 6.

 

Unfortunately, I agree. Fascism or similar would be preferable to many - without their actually realising what they're doing - to protect the fiat pound.

 

Gold is the currency of freedom.