The Return of the Gold Bugs

Newsweek ^ | December 7, 2005 | Robert Samuelson

[Petronski]

The reason, IMO that it is rising in price now is the "feeding frenzy".....a speculation driven price rise.

Witness all the threads on FR designed to chum the waters.

[mugs99]

Gold has no more inherent value than anything else -- the laws of supply and demand apply to it as much as they do to currency
Fiat currency has become worthless many times in history. Gold never has.

If you'd kept that ounce of gold since 1900, you'd have lost a lot of money.
My ounce of gold from 1900 has retained its value. Fiat currency has lost its value.

(1) You'd have had zero positive return on your investment.
Gold is not an investment. It is protection of wealth.

You'd have lost money in storage
The gold in the coffe can under my bed has cost me nothing to store.

transaction and authenticating fees,
I pay no fees. I save free gold, not coin.
I actually make more than spot when I sell.

you'd have had capital tied down in gold that you could have spent on better investments (securities, real estate, etc.).
I'd also have lost money on fees paid on those securities etc.
I'll repeat. Gold is not for investors. Its for those who want to insure that they will have purchasing power in emergencies.
.

[B.O. Plenty]

Gold Bottoms

Gold goes up. and gold goes down.....Its like any other commodity...you gotta watch close.

[Toddsterpatriot]

Now Mr Kaker you say if you had held that ounce of gold since 1900 you would have lost a lot of money. I don't know how I've made it all these years but I know you are wrong on that account.

Turning $20 in gold in 1900 into $517 in gold in 2005 only requires a 3.14% annual rate of return. I know of a few investments that have done better since 1900.

[Toddsterpatriot]

Gold is not an investment. It is protection of wealth.

Does it alway protect your wealth?

The gold in the coffe can under my bed has cost me nothing to store.

Carrying cost. Opportunity cost. What did you lose in interest or dividends on the money you spent on gold?

[Toddsterpatriot]

Witness all the threads on FR designed to chum the waters.

Chum for chums.

[Tijeras_Slim]

Nice screename.... title of an unpublished Jane Austen novel perhaps?

[mugs99]

Does it alway protect your wealth?
Yes. History shows that when fiat currency collapses, gold will still feed, clothe and shelter me.

Opportunity cost. What did you lose in interest or dividends on the money you spent on gold?
Gold is not an investment for me. It is insurance. When you can't trade your paper interest and dividends for food, I'll still be living high on the hog with my gold.
.

[Toddsterpatriot]

Yes. History shows that when fiat currency collapses, gold will still feed, clothe and shelter me.

Absent a fiat currency collapse does gold always protect your wealth?

When you can't trade your paper interest and dividends for food, I'll still be living high on the hog with my gold.

When I can't trade my interest and dividends for food, no one will be living high on the hog.

[BeHoldAPaleHorse]

"When you can't trade your paper interest and dividends for food, I'll still be living high on the hog with my gold."

Until someone trades you a copper-jacketed piece of lead for your gold, and everything else you have, of course.

[Alter Kaker]

Please explain exalted wise one.

Because it won't, as you've conceded, appreciate in value and you have to pay storage, transaction, authentication, etc. fees to hold it.

[coloradan]

That's easy to say in hindsight. Tell us, what will do better than gold over the next 100 years?

[Mr. Jeeves]

If you'd kept that ounce of gold since 1900, you'd have lost a lot of money.

The Mogambo Guru answered that very point in his latest column:

*******************************************************

- To show you the absolute intellectual impoverishment of the people who are teaching our children and/or writing our newspapers, let's turn to an article sent to me by alert reader JC, entitled "Precious Metal's Elusive Value," and written by Andrew Cassel, who is a columnist for the Philadelphia Inquirer. He quotes Jeremy Siegel, who is a professor at Wharton. Mr. Cassel quotes this, ummm, ""professor," who is so smug in his arrogance that he dismisses gold, "If you bought $100 worth of gold in 1802, Siegel says, your inflation-adjusted return would be about 30 percent. That is, you'd have a mere $130 in purchasing power after more than 200 years."

This is exactly the damned point of the stuff, you preening halfwit! Gold preserves purchasing power! Hahaha! What a buffoon! What the lackluster professor Siegel did not mention is that if you had saved a $100 in fiat cash, even as late as 1913, then your loss in buying power would have been over 96%! Hahaha! So, what do you want in your future? Depreciated and stupid fiat money, where you end up broke and bitter, or gold, where you end up where you started in terms of buying power, or (as now) ahead of the game and making big, big money on gold's rising price? Hahaha!

[Toddsterpatriot]

That's easy to say in hindsight. Tell us, what will do better than gold over the next 100 years?

A diversified stock portfolio. Don't forget to reinvest those dividends!!

[Alter Kaker]

Now Mr Kaker you say if you had held that ounce of gold since 1900 you would have lost a lot of money.

Turning $20 into $500 over 105 years is an absolutely terrible return. According to the Consumer Price Index, $20 in 1900 is thanks to inflation worth $443.11 today. So you have to subtract $443.11 from your actual earnings.

So it looks like, because of the recent gold bump, you'd have made a grant total of $50, which comes to about $.50/year.

But you actually wouldn't have. Because of course you would have needed to have paid someone to have stored that gold for you for 105 years --- and that would have easily eaten up the difference (and probably then some). And if you stored it yourself? Eventually,you'd need to pay someone to authenticate that that gold of yours is actually pure gold.

So you've probably lost a bit of money when everything is factored in, and that's not including the opportunity cost. Because if you'd continuously invested the $20 in, say, blue chips or real estate, you'd have made a spectacular return on your investment, instead of locking it up in gold.

[Alter Kaker]

Gold preserves purchasing power! Hahaha! What a buffoon!

How about none of the above? Holding cash under your matress is as bad an idea as holding gold for a long period. That's why the Good Lord created securities. Even a standard interest bearing account would have saved you money.

[Alter Kaker]

Gold is not an investment for me. It is insurance.

Bonds.

[Toddsterpatriot]

What the lackluster professor Siegel did not mention is that if you had saved a $100 in fiat cash, even as late as 1913, then your loss in buying power would have been over 96%! Hahaha! So, what do you want in your future? Depreciated and stupid fiat money, where you end up broke and bitter, or gold, where you end up where you started in terms of buying power, or (as now) ahead of the game and making big, big money on gold's rising price? Hahaha!

Who ever said that holding on to cash was a good idea? There are other investments. Even a few that do better than gold

Who's preening now?

[ArrogantBustard]

I can't read the x-axis on that graph.

[Alter Kaker]

Fiat currency has become worthless many times in history. Gold never has.

So buy Euros, Yuan and Yen and keep your bases covered. Anyway, why can't gold become worthless? Why is it anymore immune to the laws of supply and demand than anything else?

The gold in the coffe can under my bed has cost me nothing to store.

But it will if you ever decide to sell it, because you'll have to pay someone to authenticate it.

I'd also have lost money on fees paid on those securities etc.

Yes but you would have been able to afford it, given that the return are much higher. If you had invested $20 in the stock market in 1900 and reinvested the dividends, you'd have tens, if not hundreds of thousands of dollars now.

Gold is not for investors. Its for those who want to insure that they will have purchasing power in emergencies.

That's legitimate. However treasury bills, real estate, and even pork bellies are probably more secure and more likely to be convertible.