Posted on 02/11/2009 10:37:46 AM PST by OneVike
I would like to start a conversation about the logic behind investing in gold. I am in the process of transferring a good portion of my investments into gold. Now I am just a hard working Joe who wants my future retirement to be better then this current government wants it to be.
That being said, I would like to get those of you who are more conversed in the subject of investments and gold then I am into a healthy debate for me to sit back and learn from.
Don't expect much input from me other then my original plea for a debate on the subject. I will tell you what I believe and why I am interested. You can in turn tell me I am either on target or out there on Pluto. So here is my uneducated, yet serious understanding of the situation.
First off, I have watched with many of you, as our government has been giving money to whomever comes to them with hat in hand, and it promises to continue this giveaway. Then I see the trillion dollar stimulus bill being readied for the "Great One" to sign it. Also I have read that the government is prepared to buy as many bad mortgages as it can get away with. A dollar amount I have seen discussed is supposedly somewhere around 5.7 trillion dollars. Now those are some facts that I have at my fingertips, only God knows of the ones we will be blindsided with in the coming two years.
Now I do have a basic understanding of economics, and my head tells me that the government needs to print money, something I believe they even admit they are all ready doing. However, my head tells me that the government will need to print almost 7 trillion dollars just to meet their already committed expenditures.
So it is only common sense that the money already out there will be worth less, and eventually inflation will set in. Not just a little inflation but inflation that could rival the third world countries that we have regularly bailed out time and time again.
Now as I understand it, gold has always been a hedge against a weak dollar and high inflation, if I am wrong I am sure someone will correct me. However if I am right, then it would only make sense for me to take at least 30% of my worth and put it in gold. Right?
Well, I patiently await the discussion that will hopefully unfold before my eyes. I have nothing but the utmost respect for a vast majority of my fellow Freepers. I may not always agree on every subject, especially when it comes to religion, but I do enjoy the debates I have with everyone on here. Well, here I am with my hat in hand as I humbly ask you, my peers, for advice on this matter.
May we have a good respectful debate that will benefit all.
I hear ya there. You could say “the sky is blue” and some turd would come along just because he wants to harangue you.
It’s getting old.
And it’s kinda twelve-year-oldish.
In the event of predators my plan is to predate on them. That should be your plan, too.
Gold is a store of value. It's value relative to goods it can buy has stayed constant for thousands on years. If you look at it that way, having some gold can be a good long term hedge if you think the economy will get worse in the future.
I see a lot of wise discussion and advice from all parties to the OP. It gives him a lot of things to think about with his own personal investments and the cautions that many present here are wise suggestions. It is better than those who treat this commodity investment as some sort of magic financial bullet.
The way I see gold, it’s a way to protect your money from extreme loss, like if there is hyperinflation coming. I think the high price of gold right now might be reflecting the sentiments of investors that there is substantial risk of significant inflation. I don’t have money to invest, but if I did, I think I would buy land. I haven’t checked lately, but I imagine land prices have generally come down along with real estate. They ain’t making any more of it, so it just seems like a good investment to me, except that you have to pay property taxes on it :-(.
Thanks for the info.
This was just a general comment to all the 'if Armageddon' comments.. basically, if the s*** hits the fan, think about the necessities of life. (no, I don't think the s*** will hit the fan in this way). I am not the person to advise on things like medicine, I am an investor with positions in stocks, bonds, currency, and commodity. On the other hand, I couldn't tell you the difference between Aspirin and Tylenol. :->
Would you weigh in on the bullion vs. shares issue?
The last time there was a big finacial crisis (around 1979-1980 when Carter was pres. gold went up around $600. After Regan was elected it went back down to the $400 range. So if you tried to preserve some of your assets back then, you would have lost about 1/3 if you bought when gold was high. The same thing could happen now. If you bought gold back in 1999-2000, you’d be doing great right now.
Gold will be tricky. The logic of the current economic situation, or rather, the government’s treatment of it suggests that there will be a gold confiscation this year or early next. Any gold you own that is not in your physical position will disappear as will gold stored in bank deposit boxes. Storing it at home makes your home a target, especially if you have mentioned the subject to anyone you know or who knows you. Storing it elsewhere leaves it out of your immediate control. Also, any serious effort by the government to confiscate gold could easily include house searches with airport wands which will find your gold and your guns.Avoiding gold will leave you in the lurch when the money evanesces or goes to Zimbabwe.
Wow...and I usually just joke with everyone about my rings on every finger and other gold/diamond jewelry I wear. I tell them that my advisor told me to buy gold and diversify...so I decided to diversify with diamonds.
In the poorer parts of the world, Asia in particular, gold is the only store of value trusted by the populace and every family strives to own some gold as a hedge against severe inflation and hard times.
Well said.
We could live a good 2 years on what we have in there if it is just the two of us. I might let the kids in (all grown)...haven't decided yet, we'll see how much they can grovel first ; )
I would submit that Gold is not an investment. It is a store of value. A gold mine would be an investment.
An ounce of of gold usually costs about the same as a high quality men’s suit. It was true in 1800, 1900, 1950 and is true today. It will probably continue to be true for a long time. It doesn’t rise in value but it keeps its value very reliably over time. Of course the price has some volatility in it, but the peaks and valleys average out eventually.
So, depending on the point you’re at in your retirement plan, there’s something to be said for preserving principal instead of focusing on growth. If you have enough to live on for the rest of your life, then it may be time to think about minimizing risk.
But it’s not technically an investment. It won’t appreciate in real value.
As others have pointed out, in the end-of-world scenario gold isn’t really all that handy a thing to have around. In fact it’s harder to trade for simple needs than many other commodities. It’s a wildly impractical currency. Gonna try to buy a gallon of milk with gold? Not handy at all. :-)
My investments right now are shifting. I’ve been sitting on cash for quite a while. But now I’m getting back into the stock market. There are some *epic* bargains to be had right now. Sure, some of them may go down a little further, but in ten years they’ll be back up on the pre-crash curve. In twenty years I should be able to feel like a genius. :-)
My grandfather always told me to buy at least one good business suit and spend a gold ounce for it, I guess this is a common comparison. That is a good comparison, a good off the rack Burberry or Hart Schaffner Marx runs around $900 now.
I think we have to look at precious metals in terms of scenarios.
1. Status quo. Things are OK. As an investment, gold is slow but usually holds its value over time.
2. Things get rocky/uncertain. People get nervous in many investments because they are all based on the US dollar, which has no ‘real’ backing, just perceived and agreed-upon value. People turn to that which is ‘real,’ such as precious metals. If you already bought a lot of precious metals when they were cheap and sell at this time, you make a profit. But your profit is in US dollars, most likely, which is at an unstable point. So, you are banking on the US dollar getting its legs back and you having made a profit.
3. Things get really bad as bad as or worse than the Great Depression. The dollar won't be worth much. Having gold will help, if you're able to sell it. At this point, people are living hand-to-mouth, working for some monetary unit that they directly convert to food or shelter, or work for food or shelter directly.
4. Survival mode. Paper money is worthless. There are food shortages, fuel shortages. Your gold bullion is going to more of a headache than a blessing. How will you convert it for the day-to-day needs? And if you spent today's earnings on bullion you can't use in this situation, you probably don't have the water and food and shelter that you need to survive. As I said earlier, small denomination precious metals are probably worth more at this point than bullion, unless you go international to convert it. But, if we're in the boat of situation 4, the rest of the world is probably, too.
During the Great Depression, FDR confiscated all privately owned gold. But the law they passed was only to confiscate bullion. Precious metals with other value (like jewelery, coins, etc.) they couldn't confiscate. So, those types of metal are safe. It doesn't mean they won't confiscate them, or paper shares in precious metals, if we get close to situation 3 or 4. They may very well. But, if they do, it would be easier to use the small denominations in a black market.
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