long term investment

gadgetmind

lvader wrote: »

If that coincides with interest rates going up then there is only one way gold is going and that is down.

Gold and gilts are both "fear assets", which is at least partly why those holding a lot of either/both spread as much FUD as they can regards other asset types.

MrMalkin

sabretoothtigger wrote: »

Gold sovereigns are 1 pound coins. In 1900 1 sovereign was one pound, in 2012 1 sovereign is 250 pounds or 250% 'growth'

Except the chart you posted is adjusted for inflation whereas the figure you quoted for a gold sovereign is not, so they're not comparable.

sabretoothtigger

The point is when gold last rose very sharply it was during a period of rising interest rates.
We cannot doubt that at some point now rates have to rise very quickly so if you fear this will destroy gold it would make no sense to own.

Certainly this must be what depresses the gold miners, what is the point of having the ability to mine 1 million ounces of gold in 2014 if interest rates are rising by then.
Today the Federal Reserve hints at no more QE and gold drops $70 in one hour, this is why people think its bad to own

So yea on the face of it dont own any just trust in the surface value and fine words and that cash will be fine.
The real reason to own gold is that it does not have counter party risk, it is a form of cash not reliant on a promise or bond. If you think that element will become more valued then it will certainly rise in price

When interest rates are 5% inflation will be 10%. It will take a long while before they are much closer.
Everything has to be examined as a ratio to make sense for buying gold, on face value only cash is best I guess



Here is another take on why cash savings do not have a positive return even with what appears good interest.

Linton

MrInvestor wrote: »

Don't want to sound nit-picky, but isn't it 25,000% growth? Or did you mean 250 x growth?

Lets be really nitpicky - isnt it 24900% growth?

MrMalkin

MrInvestor wrote: »

Not in the UK for at least 5 years. Not in the UK today. And I am sure many would agree - not for the foreseeable future in the UK.

So when gold underperforms inflation I get shouted down for picking dates that are somehow unfair, but when a gold bug points out that cash underperforms inflation for even shorter periods that's fair game?

Behold the spectacular mental gymnastics required to be a gold investor.

MrMalkin

sabretoothtigger wrote: »

The real reason to own gold is that it does not have counter party risk, it is a form of cash not reliant on a promise or bond. If you think that element will become more valued then it will certainly rise in price

The real reason not to own gold is that it is the ultimate fiat currency. It has worth purely because people believe it has worth, the second that illusion is revealed the value disappears.

Stocks, bonds, property, and even cash in savings accounts all have value because because they produce an income. They have value inherent in the very way they generate money for you.

sabretoothtigger wrote: »

Here is another take on why cash savings do not have a positive return even with what appears good interest.

It proves absolutely nothing of the sort. Cash has a positive return when interest rates are taken into account, I don't understand why you aren't getting this.

MrMalkin

Here, take a look at this, the UK real rate chart is about halfway down. When the blue line is above 0 that's when cash had a positive yield. Note that it has been above the line for much longer than it has been below it, hence the 1.9%ish real return on cash.

http://greshams-law.com/2011/04/27/global-real-interest-rates-monthly-graph-update-27411/

lvader

Nice correction in PMs today, Gold down about 5%, Silver 6.5% Haven't seen that for a while.

gadgetmind

lvader wrote: »

Nice correction in PMs today, Gold down about 5%, Silver 6.5% Haven't seen that for a while.

For PMs and gilts, I think we're going to see a bit of a saw tooth, and then a drop off a cliff.

One IT I hold recently said that holding these assets right now was risky, but not holding was suicidal. Once the latter it taken off the table ...

brasso

MrInvestor wrote: »

I stated that a lot of investors claimed that gold was at an all time high and it was a bad investment. A number of these same people generally made a loss, however I averaged 30% increase in value in the same period. They called me foolish at the time but who made the better investment over those 2 years?

7% is probably quite respectable, however the first 5% of that can be knocked off by the rate of inflation. You might be making 7% but your purchasing power has decreased by 5% in the same period. I predict a much higher rate of inflation over coming years - as are many top economists and private investors! Hence my confidence and predicted safety in gold.

You sound just as smug as the "house prices only ever go up" types used to, just before the global economy tanked.

When you've been lucky with an investment -- as we all have at various points -- you feel so much smarter than everyone else, don't you? I guarantee that you will ruefully look back on some of your comments here.