investment in gold

Aegis

sabretoothtigger wrote: »

gold has outperformed shares for about 4 months now and longer term over 2 years also

My comment was on the predicted price for 12 months from now, which seems to be more or less nil growth. Gold was always going to become more expensive during a global recession, now that we're coming through there's no reason to assume that the growth seen over the last year or two will be remotely sustainable.

4 months and 2 years outperformance is pretty meaningless, it's all about the fundamentals going forward. The goldbugs out there think that the price will just keep rising, but the majority of investment analysts are advising caution and are stating that this is a classic bubble effect, that the fundamentals simply do not support ongoing growth and that the current growth is buoyed purely because of the uncertainty in the equity and property markets. Once that uncertainty retreats again, large institutions will start looking for better returns again, and it's going to be the small holders who suffer the most from the subsequent price drops. There's then the possibility that gold will do next to nothing for another decade or more, and without an income stream generated from the capital, that's got the potential to be an awful investment.

Basically my point is that gold is pretty much just a gamble with your capital at this time. Fine for a small part of someone's portfolio, but buying into it will a large chunk of your net worth would, at this time, represent a huge risk of losing a large chunk of that money.

bendix

cloud_dog wrote: »

It never ceaes to amaze me how people cherry pick the bits they want to critique so they can talk in terms of absolutes. I think people have been deliberately mis-quoting Digger - shame on you.

No they haven't.

Digger is on record as saying - on more than one occasion and with monotonous regularity - that "gold is a no risk investment."

If you want to critique absolutist views, i suggest you start with that for a proposition.

It is patently not true and is either done through single-minded laziness to explain what he really means, or he has a very warped understanding of the concept of risk.

DiggerUK

Buddy143,
I stand by my advice for you to clear your debts, buy a sovereign, and follow it's fortune to find if gold is for you.

All paper assets, money, shares, corporate and government bonds etc., can end up worthless. Gold on the other hand will never end up worthless.
Paper has a total risk attached to it, gold has no such risk.

Edit, good background in this FT article.
http://www.ft.com/cms/s/2/c1a7efb0-e0fd-11de-af7a-00144feab49a,dwp_uuid=6997947c-a442-11dd-8104-000077b07658.html

sabretoothtigger

sabretoothtigger wrote: »

gold has outperformed shares for about 4 months now and longer term over 2 years also

Just copying over a compilation I posted elsewhere

4th_Dec wrote:

Encouraged by a strong gold price, Canaccord Adams increased its target price for shares in Russian gold miner Petropavlovsk (POG) (formerly Peter Hambro Mining) to 1,700p from 1,300p. "On our numbers, the stock trades at 0.49 times NAV (5% discount rate and spot gold) compared to an average of 1.3 times for senior North American and European producers," noted the broker. "In addition, we continue to estimate the company can fund all planned expansions in gold operations from operating cash flow. We suggest this independence from external capital markets will go a long way towards re-rating the stock," it added. Canaccord reiterated its 'buy' stance for the shares, which fell by 5p to 1,311p.

Like all good broker calls, the price for POG (the russian miner not price of gold ) fell just after but theres still long term trends indicating an eventual recovery.
RIght now they appear to be just above a support line on the daily chart after falling 12% in the last few trading hours after a revision down in their production estimate for this year




In general the price of stocks vs gold appears to be declining in a broad price channel dating back a couple of years. (the negative part of this trend resumed as of August, indicating this is a bear rally imo )




"

POG is 1/3 cheaper than Randgold on NAV basis and 1/4 price on relative earnings

Given past production disappointments, investors still do not believe management’s production forecasts. In May 2009, POG released its production targets for 2009-2012. The company produced 346koz in the 9 months September and we anticipate it will produce c.500koz for the full year. The company is forecasting 2010 production at between 685-769koz, yet the current range of analysts’ forecasts is between 557-709koz (Liberum forecasts 718koz). Given that production in 2009 is already at the top end of the company’s guidance we believe this range is too large and we anticipate an upward revision of analysts’ forecast production as we move towards March 2010.


Randgold currently trades on c.4.5x NAV, whereas POG is on 1.67x NAV. Reserve and short term production increases will lead to material increases in NAV come March. We believe POG should trade on at least 2x NAV and therefore we estimate fair value at £15.55/shr. POG is even more compellingly cheap on a relative basis – on spot it currently trades on 11.5x 2010 PER and 10.8x PER. Randgold trades on consensus 43.4x 2010 PER and 27.9x 2011 and Centamin on 27.4x 2010 and 14.3x 2011. We expect this two year earnings discount to narrow as The Street upgrades its production forecasts for 2010 and 2011.

"

sabretoothtigger

now that we're coming through there's no reason to assume that the growth seen over the last year or two will be remotely sustainable.

Gold has no growth, its just yellow metal that apparently keeps its worth long term thanks to limited supply, in theory I accept its not good for that much. I agree it shouldnt be a main investment

I dont think it has grown exactly or will but the risks to common currency have grown and inversely this represents potential for the price of gold to continue rising or at least maintain its present level


The other way in which its prospects grow is in a switch from mostly jewellery to a reserve currency so rising demand with limited supply leads to a natural rise in price.
Is the demand for a reserve currency justified? Thats a political economic view I guess and mostly about america but also uk prospects, I dont believe gold can be labelled correctly as a bubble and the fundamentals as an investment seem good imo



1.9% CPI Inflation
http://www.iii.co.uk/news/?type=reutersnews&articleid=TRE5BE1BX&feed=Bus&action=article

http://www.iii.co.uk/news/?type=afxnews&articleid=7671723&action=article