re: The myth of gold being an inflation hedge

'You know this and I know this. So why engage in brainless schmuckery?'

Because ruskie is a Whore For Government Stats...and, we all know that the last thing the Fed wants is people selling off dollars and buying gold...cause bankers have absolutely no control over gold in private hands. Right WHOGAS?

If your mission was to make yourself look like a moron, you have succeeded.

Could you let us in on which financial institution/bank you are associated with? I will make sure to avoid it like the plague.

Russian

I am by no means an economist but I don't see how gold could be a bad investment. If it continues to have similar performance over the next 30yrs then it seems to be a safe way to leave my children and grandchildren a tax free (until they try to sell it) inheritance that will continue to grow.

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There have been over 8,000 fiat currencies in world history and every one of them have gone to zero value, usually due to bad governance.

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This is irrelevant because for the scenario goldbugs love to promote, all the currencies would have to go bust at the same time.

So if I happen to have a bunch of dollars, pesos, pounds, euros, renminbi and yen, and the dollar goes to zero, my entire basket still has value.

And if I have a house and a nice stock portfolio, none of that matters because they also have value.

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Please go back to whence you came if you're just going to sit around and call people names.

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Are you going to call Russian out for calling me a "jerkoff", or are you as dishonest as he is?

Russian, that article was a nice find.

"Yet gold is valuable only as long as we collectively agree that it is. It may be soft, shiny, durable, and rare, but it has no more intrinsic value than feldspar or quartz. Just because it has a long history of being used as money doesn’t mean that it has a future. In the end, our trust in gold is no different from our trust in a piece of paper with “one dollar” written on it. The value of a currency is, ultimately, what someone will give you for it"

This is the key. If everything goes to hell, there is no reason why gold should necessarily have any value to speak of. You can't eat it, it's a terrible construction material. Canned goods would be far better.

Last time I checked it was costing about $450 oz to bring gold from rock to finished product. That isn't a bad floor.

Printing dollars is almost costless.

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So if I happen to have a bunch of dollars, pesos, pounds, euros, renminbi and yen, and the dollar goes to zero, my entire basket still has value. And if I have a house and a nice stock portfolio, none of that matters because they also have value.

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Yet another reason for international equity investing which provides currency diversification. Gold sure seems to get certain parties panties in a wad....

Good questions, bayoudude. I will try to answer them and I apologize in advance for the length of my response.

None of us knows what gold or any investment will do over the next 30 years. Gold might be the best investment. It also might not be. So when gold bugs try to spread their poison that the world will end soon (that has been going on for centuries, btw) and that only gold will get a person through it, well, that is just plain wrong.

Now, specifically looking at the graph you posted, look at the period on it between December 31, 1982 and December 31, 2006. That's 24 years when the nominal price of gold increased from around $456.90/oz to $632.00/oz, or 38%. (I used this website to get the precise numbers LINK ). No dividends, no interest, and yet inflation during that time was 106.76% (using this website LINK to calculate the inflation rate during that time.)

That means gold, if it was truly an inflation hedge, should have increased from that original $456.90/oz to $945/oz (compared to $939 today) just to remain even with inflation.

The recent spike up in the nominal price of gold can really be just considered a 'catch up' to inflation, not a hedge against inflation.

I could not find a graph for the S&P 500 index during that time, but here are the raw numbers:
12/31/82 = 140.64
12/31/06 = 1418.30

And increase of 908%, far outpacing the 106.7% pace of inflation during that time (compared to the 38% for gold shown above).

Which would you rather have left your grandchildren with?

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it seems to be a safe way to leave my children and grandchildren a tax free

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Except it may not be tax free. There is an inheritance tax due on assets, above a certain level, passed on to the next generation(s) and the tax is based upon the value of the asset at the time of death (Or a period later if you chose the alternative valuation date. I will leave the tax questions to Poodlebrain. He's the expert on taxes.) Of course, the tax implications would apply to stocks as well as gold. And with gold (or stocks), your grandchildren might have to sell it in order to raise the money needed to pay the taxes. The gold market is not nearly as liquid or efficient as the stock market. Transaction costs are higher and the bid/offer spread is wider.

To sum up, gold MIGHT be the best investment over the next 30 years. But it historically has not been a better investment than owning stock in companies over a long-term period of time.

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Please go back to whence you came if you're just going to sit around and call people names.

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That is a trademark of gold bugs when they get cornered, kfizz. They are all alike.

They can't use facts, numbers or logic to prove their fascination with that "soft, pliable, yellow metal" so they have to resort to personal attacks to anyone who questions their "wisdom."

In fact, true believer gold bugs all fit the same personality type: distrusting, paranoid schizophrenics. They are all the stereotypical crazy uncle at family reunions who everyone tries to avoid.

ETA: SEE?!?

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Yeah, I wanna leave my kids invested in a market that is totally controlled by a few big bankers

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There is zero question that you an alter.

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Good catch! I didn't consider that. Rivers lives in Florida. The alter is from Florida. Hmmmmmmmmm??

If it is not an alter, it might prove there is something in Florida drinking water which creates a fetish in people's brains for soft, pliable, yellow metal.