Rodney

I did put some money in gold a few months ago... and so far that seems to have been a good move, as the price keeps going up. Nothing's sure, of course.

Anybody else out there into gold now, or in the past? Would like to know how you feel about what's happening with the price of gold.

I'm about as far from a stereotypical gold bug as you can imagine; no guns, no survival gear, no plans to flee to Belize when the "inevitable" breakdown of civil order occurs.

But it has occurred to me that we as a nation -- both as individuals and through our government -- have been spending more than we sell for a very, very, long time. And it has occurred to me that the dollar can only be inevitably weakened by this, so that eventually 1) the value of the dollar sinks relative to other currences, or 2) interest rates have to rise substantially to persuade foreign concerns to keep buying our debt.

In short, it is my call that the dollar will be in trouble sometime within the next five years. I don't know what kind, or how much, but there will be trouble, and very probably a significant drop in its value.

I'm not buying gold to get rich; as an investment, long term, it isn't all that great. But I'm buying it as insurance against a fall in the dollar, to be held for no more than five years. If the economy straightens out and all is well and I lose a little on the gold -- well, I expect insurance to cost money. But if the dollar doesn't straighten out, I've got a hedge. And as somebody who's a lot closer to retirement age than to legal drinking age, capital preservation is something you gotta think about. I just never thought the economy would get to the point where I'd have so little faith in the dollar.

What are your thoughts on gold, or the dollar?

Charlatan

My only though about gold vs. stocks (or similar investments) is that with gold you have to also calculate the cost of storage and insurance which can be significant if you are into gold in a big way.

I also find that gold is an odd commodity. Those who would believe it would have value in a disaster situation are taking a big gamble. Just because it had value in the 16th and 17th century does not mean you will be able to trade it for goods in a post-money sort of situation (not saying you Rodney just speaking generally).

Personally, I would stick something less volitile like the British Pound Sterling...

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BigBen

Well said, sir. Very well said.

I think that everyone should keep SOME gold or precious metal/stones in their portfolio. Having said that, I have to say that the investment is worthless unless you are HOLDING THE PHYSICAL GOOD.

I see people with stocks of gold (or stones) in their folios, but don't have posession of the gold. They are fooling themselves, ans more often than not the folks are in a hedge fund or a futures market without knowing it.

When you are putting down money for a rock-solid insurance like this, make sure that the gold is in YOUR HOUSE, and that it is insured against theft/fire/et cetera.

If you need gold because something bad happened and you are using it as a bargaining tool, remember to have it with you, not in a safe-deposit box down the street.

You said you aren't one of those survival guys, so it sounds like you don't take it that far, but please take a second look at your investment and look to make sure that the date of delivery is IMMEDIATE. Anything other than that, and you are playing the market like the rest of us suckers, and the investment isn't that great as far as a rock-solid insurance thing goes.

If you are scared of the US dollar, might I suggest that you look at an EXPORT HEAVY portfolio. As the dollar weakens, US export goods become cheaper relative to the world market, and exporters do very well. A simple advisor will be able to tell you what funds are export heavy. That way, you can also feel good about having your money in your native land and providing jobs locally. I swear, people are concerned about stuff like this, and they feel guilty in just buying Euros and the like.

To each his own. I keep a very limited quantity of gold on hand, and I make sure the denominations are workable and small. (1/16 troy oz, up to 1oz.). If I have to barter for something, I will give the small gold wafer over in its pretty little package, instead of risking getting screwed on a deal. Gold holds intrinsic value, and will outlast any country, currency or market.

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Hey, if you are impressed with my memorizing pi to 10 digits, you should see the size of my penis.

Rodney

Of course, here is where we leave the realm of pure logic and enter the realm of belief and trust; more specifically, what humans are willing to believe in and put their trust in.

But again, such feelings are part and parcel of the study of economics, which makes a great many presumptions about human behavior (many of them wrong, because economics too often presumes that humans make "rational" decisions, and then defines what "rational" is.) Gold may not be the most rational decision. But emotionally, it may seem the safer decision to many in a dire situation, because it is familiar and has a history.

It is true that you can't eat gold, nor live in it, nor farm it. But belief in precious metals as a store of value is still high, especially when paper money looks shakey. Gold and silver were very big in the inflationary 70s, as were swiss francs (100 percent gold backed). And even in a very dire situation where the larger economy has broken down (and I do not expect this), you can't do _everything_ with barter.

There is some talk now of gold becoming the defacto _fourth_ major world currency, after the dollar, euro, and yen. Because while it pays no interest, it may command more trust as a value receptacle than paper money in difficult times. All forms of money, precious-metal-based, paper, or electronic, live on trust alone.

I agree that gold is an odd investment; storage and insurance can cost, although you can buy and sell "securitized" gold on the NYSE through a gold pool that works more or less like a mutual fund. And it is certainly nothing that I would put my long-term faith in. But as short-term insurance, I have turned to it.

Rodney

I don't expect economic armageddon, but I'm willing to entertain the possibility. So while I'm not stashing gold around the house, I did ensure that I have quick access to some of my investment. And if economic skies were to darken in an apocalyptic way, I would not wait until the last second to claim them.

I am going to put some money into a securitized gold fund; but that's from from an individual retirement account, and by law the investment has to stay in some kind of fund.

martinguerre

gold doesn't have intrinsic value, save that it is used in manufacturing processes.

platinum is, as i understand it, more value per pound as far as industrial uses go.

but gold as a financial commodity is just as unstable as any other currency. it can be inflated by discovery of new ore, or have it's value flucuate wildly against other forms of transaction.

In short...it can be useful in hedging against a falling dollar. But only because that's the way it functions economically, and thus subject to change. The atomic structure of gold does not give it financial properties.

Export funds or Euro based funds, IMO, are a better protection against dollar devaluation.

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eribrav

The reason gold is a more effective hedge against the dollar than euros is that it can't be spewed out of a printing press in infinite quanitities. Any of the paper currencies can be destroyed by the governments that issue them. Many of us here in the States think we're well down that path. There's no real reason to believe the euro is in any better hands.

I hold physical gold and silver, stock in a silver miner (PAAS), and shares in a fund that owns precious metals. Some of you might want to check out the fund. It's the Central Fund of Canada, ticker CEF. Note that at any given time it can trade at a premium or a discount to the actual value of the holdings, just like any closed end fund can.

Astrocloud

Well said. when bargaining on the street it's good to let the other stone cold pimps that your holden the goods. So invest in a grill

Rodney

Hah. I'd invest in some pliers.

xepherys

Here's the way I see it. And remember, I'm new to this (plan to buy my first bullion in January).

Platinum is a great investment because it's useful. Palladium, specifically, seems to be very useful, has a reasonable spot price and also happens to be beautiful metal. Platinum is about as sure a way as you can invest in precious metals.

Silver is a decent investment. It's cheap, and therefore can easily be purchased as larger (heavier) bullion. It's well-known and has uses. It may not be worth much per pound, but it's also not going away.

Gold is a standards investment. It DOES have industrial uses (many, in fact) aside from being a worldwide commonality for riches and wealth. Also, to hell with the 70s or the 1800s... Gold has been a valuable commodity since the dawn of history. Having gold "come back" as a world currency is almost a silly statement. I understand the premise, but has it ever really NOT been a world currency? Sure, most people don't walk around with a sack of dubloons hanging from their waist these days, but it's still global. Also, it a great investment strictly by weight. If your local economy collapses, every other major economy in the world is STILL going to have a gold market. *shrug*

Rodney

While I basically agree, the common wisdom among financial wizards of the '90s and early '00s was that gold was a 'has-been,' and no longer had credibility as a currency. They referred to the pretty low gold pricing through the '90s as their proof. And most people believed this. What the wise heads didn't say was that central banks were dumping much or most of their gold reserves through that period (and up until recently), helping in large part to keep the price low as stocks and real estate and other investments climbed. As to why they were doing this -- well, you can get a lot of conspiracy theories. I wouldn't say.

Now we're having a reaction to the gold and monetary policy of the '90s. Some people aren't so sure of the dollar or _any_ of the major currencies as they have been, due to a continuing oversupply of currency and debt and a growing undersupply of commodities that can be bought. This has led to increasing commodity prices (oil, sure, but also copper and other metals), and also to an increase in the price of gold because 1) it is a valued commodity of limited supply, 2) it is a form of money that cannot be produced at will in arbitrary amounts (difficult to cheapen), and 3)the low prices fostered for years by central bank sales discouraged investment in new exploration and development. Which means that given a healthy demand for gold, production may not keep up with demand for years, if ever.

I guess I'm saying, yes, gold has always been a currency. But for a while there, people were bluffed into believing that it wasn't, any longer. Some of us are questioning the bluff, especially as the supply of paper-based money and debt grows higher and higher but the actual real wealth being created by most industrial countries does not increase.

Rodney

Update: gold at $600. I'm personally doing very well with it -- so far -- but I'm wondering what all this price speculation says about the world economy. One interpretation -- the big boys are worried about the dollar, the price of oil, and maybe even the euro, and nobody knows what's going to happen next. Scary times.

macmanmike6100

The dollar's not going away any time soon. Yes, the dollar is most certainly in for a major correction, but it's not going to be a collapse. And again, if you really are worried about the dollar's utter collapse (remember, this is a global currency), then you should be hunkering down in your basement, not trying to play the market.

Rodney

A "correction" sounds like such an innocuous thing, but it could be huge. Like when the British pound "corrected" from $5 to $2 or so back in the late '60s. A devaluation of even 30 percent would have major effects, such as an increase in our cost for oil (if the sheiks decide to demand more of our less valuable dollars for their oil, which they probably will).

Even if the dollar doesn't fritter sizzle away to nothing, a "correction" of even 30 to 50 percent would have serious connotations for people's lives in the US, not least their retirement plans. Imagine the cost of energy _also_ going up 30 -40 percent more in dollars because the sheiks or the Venezuelans demand more of our less-valuable dollars for a barrel of oil. And then think about th cost of that energy rise rippling through even things that we make ourselves, like food, heating oil, even paper.

Some people say that a devaluation will bring more manufacturing and outsourced service work back to the US, because the relative cost advantage of Asian manufacturers would be decreased. But that's not a given. And even if it were, our purchasing power would be far, far down.

We used to be important in the world because we were an economic powerhouse that produced to the world. Now we buy more than we sell; we 're still important in the world, only as a consumer only, and as the owner of a military that we pay for with borrowed money. But when the money runs out...

macmanmike6100

In the scenario described above, hoarding gold securities are not going to help, right?

And I agree, a 'correction' could indeed be major, but I think the ripples would be so far and wide (i.e. world economy scale) that global interventions would come into play. World depression all over again? Perhaps, but I doubt that the true financial string-pullers of the world would let that happen, as even the rich weren't unscathed in the 30's.

Rodney

Not guaranteed, no. But if the dollar is devalued and there is a flight into other stores of value by investment funds -- not necessarily the euro, but commodities and assets like gold, silver, oil, and other things, even farmland and agricultural commodities -- gold might hold its "real" value relative to the shrinking dollar, or even spike far over its sustainable value for a while in panic buying.

That said, I hold mainly gold as an insurance policy against a radically lower dollar. If the dollar sinks, and I sell at the right time, I maintain some of the value that I would have lost otherwise.

A "bubble" in gold prices would be very nice indeed for me, but is not my primary wish. As soon as the financial situation stabilizes on some level and new rules of economic play come to the fore, gold's value will sink again. I will sell before then, or try to.

The keepers of world finances -- the G8 people, the World Bank, and so on -- just officially admitted that there were problems with this state of affairs (global imbalance between Asian lenders and US borrowing) in the last week or two. They've moved very slowly as things have progressed. I wouldn't say that they won't try to do something, but will they be successful? Will they be fast enough and effective enough? Will their remedies be politically saleable?

These are open questions. There has been so much malfeasance and foolishness at the lower and middle levels of world finance these days, is it wise to trust that things are different at the top?

mokle

I should have bought at $500


http://english.pravda.ru/world/ameri...6/80189-gold-0

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Mokle
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hunnychile

I've been advised to buy actual rare gold coins, if I want to be more diversified in my portfolio. It takes lot's of research and never trust just one advisor. Gold will always have value IMHO. The key is to be diverse and well educated about the risks and amounts to hold in various funds. Gold jewelry holds little value BTW.

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