Gold is a stagnant investment
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Gold is a stagnant investment
Posted by smilodonfatalis on 4/7 at 9:08 am
Read this in a business column this morning.

In 1981 gold was $613 an oz. Adjusted for inflation that would be worth $1727 today.

The current price of gold is ~$1552 an oz. So if you bought gold in 1981 it would be worth much less today.

Plus it pays no dividends. A gold buyer in 1981 would be a double loser.




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Posted by Doc Fenton on 4/7 at 9:12 am to smilodonfatalis


LINK



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Posted by Bestbank Tiger on 4/7 at 10:17 am to Doc Fenton
In other words, gold doesn't go up in value. It just goes up in price.

Good hedge against inflation, but stocks are probably the best long term investment. If they suck over the long term, we're all screwed anyway.



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Posted by Newbomb Turk on 4/7 at 10:49 am to smilodonfatalis
I've got a small amount of gold -- mainly just Krugerrands I've picked up over the years. I never really thought of it as an investment per se as I never really plan to sell it. Hopefully, it will just be passed on to my heirs. To me, it's strictly a hedge in case the entire world economy goes to shite. If that happens, my small amount will skyrocket and hopefully will get me through any great world depression.


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Posted by rintintin on 4/7 at 12:31 pm to smilodonfatalis
I don't think most people buy gold looking to make money, as Turk said its mainly a hedge against inflation and an economic disaster.


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Posted by Ace Midnight on 4/7 at 12:44 pm to smilodonfatalis
It is a hedge against inflation/deflation. It gives you a buffer. It is not strictly an "investment," but, rather a diversification "purchase" if you will.


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Posted by Teddy Ruxpin on 4/7 at 12:52 pm to rintintin
quote:

and an economic disaster.


The way I see it, in such a scenario gold would be worthless to the average owner because the guy with more guns is just going to take it from you.



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Posted by rintintin on 4/7 at 1:00 pm to Teddy Ruxpin
If the guy with more guns is willing to take your gold, what's keeping him from taking everything you own? If your deduction is correct then there would be no point in acquiring anything of presumed value.


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Posted by Teddy Ruxpin on 4/7 at 1:19 pm to rintintin
quote:

If the guy with more guns is willing to take your gold, what's keeping him from taking everything you own? If your deduction is correct then there would be no point in acquiring anything of presumed value.


What?

Let me single out the point I think you missed. People don't acquire wealth for the specific purpose of hedging against catastrophe (They acquire it for that a bit, but also for vacation, shite to buy, retirement, etc). Some gold buyers do buy for that purpose.

What I was saying was, if you are buying gold for the specific purpose as a store of wealth during a catastrophe, my opinion is that you are wasting your time because gold will probably never fulfill that purpose because I feel in such a scenario you will never peacefully be able to transact with it to acquire goods. Therefore, it is neither helping you during times absent catastrophe or during them and therefore could be seen as a waste of time and effort.

However, my assets for investment, while they can be stolen during such a catastrophe and therefore "worthless," are clearly not worthless in the absence there of.

Hence, the flaw in your argument.

Of Course, you could have the scenario where there is economic catastrophe of such proportions where gold was the only reliable asset yet civil order and peace were in abundance as well, but in my opinion that is doubtful to occur. And in my opinion, the Great Depression doesn't count as an example but I'm willing to hear the argument.


This post was edited on 4/7 at 1:45 pm

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Posted by Walking the Earth on 4/7 at 2:03 pm to Teddy Ruxpin
quote:

he way I see it, in such a scenario gold would be worthless to the average owner because the guy with more guns is just going to take it from you.



There's a pretty wide field between "economic catastrophe" and "end of civilization"



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Posted by ItNeverRains on 4/7 at 2:04 pm to smilodonfatalis
I would be more interested to see a chart from 1913-present. I'll try to dig one up.

I also be inclined to think the average gold bug is also a gun bug.



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Posted by Doc Fenton on 4/7 at 2:08 pm to ItNeverRains
Most charts don't back that far, because the price of gold used to be fixed to the currency.

If you want historical market values going back to the 13rd century, you can check out measuringworth.com.



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Posted by Teddy Ruxpin on 4/7 at 2:09 pm to Walking the Earth
Sure. I mentioned the great depression. Did people who had prepared with gold lug it out and start using it? How about during previous panics? I honestly want to know because I have a hard time finding a scenario where people stop taking currency yet are peacefully transacting like normal but with gold.


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Posted by Walking the Earth on 4/7 at 2:12 pm to Teddy Ruxpin
FDR put the brakes on that when he was inaugurated by forcing a gold buy back.

That could take place in a future economic disaster, of course, but I think the general public would be a lot more resistant to such an order today.



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Posted by rintintin on 4/7 at 2:47 pm to Teddy Ruxpin
I don't think people plan on actually purchasing items with gold shillings like back in the day. I believe the thought is more geared towards the fact that gold has historically held its value globally, independent of fiat currency. If a currency collapsed locally, one could use gold as a store of value and move to a new area wherein the gold could be used to acquire the currency of the new area.

Or if a new currency needed to be put in place, again, gold could be used to store value during the transition period then to acquire said new currency.



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Posted by Teddy Ruxpin on 4/7 at 2:59 pm to rintintin
First scenario my opinion is that could work if your local economy isn't the USA since if the USA collapses there will not be many places to move to who are not suffering almost as badly.

The second scenario could work if you could protect your assets of course, regardless of place of residence.

Obviously its all theoretical and if you have the money and the gold insurance works then you win and I lose.


This post was edited on 4/7 at 3:17 pm

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Posted by rintintin on 4/7 at 3:43 pm to Teddy Ruxpin
quote:

First scenario my opinion is that could work if your local economy isn't the USA since if the USA collapses there will not be many places to move to who are not suffering almost as badly.


Yeah that's the kicker. We're in a situation living in the US where if our currency collapses overnight, much of the developed world will feel the effects also. I guess that makes the second scenario the most likely situation for us, and as you say protecting your assets will be a high priority, which also justifies your earlier assessment about having more guns....or a good hiding spot.



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Posted by goodgrin on 4/8 at 12:02 pm to smilodonfatalis
quote:

A gold buyer in 1981 would be a double loser.


Thank God I didn't buy gold in 1981. But... I bought gold bullion coins in 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012.


quote:

Plus it pays no dividends.


No it doesn't, but the right mining stocks will and the dividends should get larger when the price of gold rises.


It's this type of post that should cue one to start buying more gold. After all...
-The Euro crisis is over - No
-The debt ceiling is pretty much resolved - No
-The stock market is safe is for the average investor - hell no
-Unemployment is at 7.6%?

How about the real figures show that the labor force participation rate has just hit a 30 year low. The economy is failing to create new jobs.
-The US debt level will hit the danger zone that Greece was in just a few years ago when the European debt crisis started in a grand fashion.
-Is gold in a bubble? No one on this board has ever posted anything backing up this claim.
-Is gold expensive? It is, depending on your financial circumstances, but it will seem much more expensive when it's valued higher.

Another winning negative gold thread book marked for future shits and giggles.



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