Invest in gold or something else ?

grey_gym_sock

DiggerUK wrote: »

Why the fake news

the term "fake news" is now being used (and not just by digger) to mean "anything i disagree with".

You really need to double check your sources before posting...

read the labels more carefully. the graph - http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart - is the inflation-adjusted gold price.

i guess that's not a graph you spend much time looking at, or you might realize that there's no overall uptrend in the gold price after you allow for inflation. for instance, the recent peak price in 2011 was lower than the previous peak in 1980. OTOH, the recent low in 2001 was higher than the previous low in 1970.

grey_gym_sock

Carrieanne wrote: »

The drones who are too stupid to understand that the fiat money they worship has no intrinsic value whatsoever and is on its deathbed will suffer the most when the controlled demolition of the current monetary system is triggered because they have no physical gold as insurance.

how about providing some evidence for these bold / delusional assertions? who is going to trigger a "controlled demolition" of the monetary system, how, and with what motive?

if "who" is anybody rich, then you have an obvious problem with motive. in the current, credit-based monetary system, for all money there is both a debtor and a creditor. to over-simplify only a little, it's the 99% (the debtors) who owe the money to the 1% (the creditors). so why would the 1% want to destroy the value of the debt owed to them?

DiggerUK

grey_gym_sock wrote: »

the term "fake news" is now being used (and not just by digger) to mean "anything i disagree with".
......read the labels more carefully. the graph - http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart - is the inflation-adjusted gold price.......

I did read the x and y axis on the graph. But it's quite clear that the poster hadn't, otherwise their comment would have reflected that.

The action of inflation on gold, that relies purely on capital growth to counter devaluation by inflation, has to be taken in to account. The poster simply grabbed hold of a chart that seems to fit what was clearly no more than a prejudiced comment on gold.

These inflation adjusted charts have a validity to them. But the truth is that over time, inflation+ growth is achieved. This is sharply brought in to focus, when you go from the post Nixon decision to abandon gold price fixing in 1971, and let the price of gold float..._

bowlhead99

DiggerUK wrote: »

As an aside, if you had started buying when it hit it's highest price in September 2011, and continued by regularly purchasing on a monthly basis, you would be up on the deal. All that shows is that 'averaging in' over time can work.

What that shows is that if you bought a bunch of ounces at a relative peak, then at any time over the following five years you had wanted to exit, you would, on average, be losing money on all of those ounces. It doesn't seem to have protected your wealth over time. That's ignoring the ravages of inflation against which it has performed even worse in that particular time period.

The price is volatile and speculative. If you have gold as your retirement plan because of its 'secure and inflation-protected' properties, and the price at retirement is lower in real terms than it is today, it will be scant consolation to be told "well yes, you have lost money, but if you keep buying now at relatively cheaper prices, then eventually if it recovers and goes up from here you will have made money on these new ounces even though you still might not make any money on those old ounces".

DiggerUK wrote: »

I did read the x and y axis on the graph. But it's quite clear that the poster hadn't, otherwise their comment would have reflected that.

The poster gave us the link, thus inviting us to check it out and draw our own conclusions.

Clearly the prices are today's money; an ounce of gold was not $600 in 1935 dollars, you could buy a car for that.

My conclusion is that it would have been somewhat frustrating if my grandfather as a teenager had bought a few ounces of gold for his retirement and then sixty five years later when he was in his eighties on his deathbed and wondering how much he can pass on to his grandkids, the answer is that they are only worth half as much in real terms in 2000 as they cost him in 1935. I am sure you would conclude the same. It didn't work out for him. When his kids inherit them and immediately cash them in to help them buy a home that they need to live in, they are getting less money back in real terms than granddad paid several generations ago.

As it happens if his kids could have waited a further decade, to 75 years after granddad bought them, they would be back in the money. But assuming you can't wait forever for a turnaround, that is not much consolation, especially when what granddad bought was supposed to be a safe store of wealth.

That is the problem with something that is purely speculative and does not have any actual growth properties unlike for example a share in a portfolio of profitable businesses.

The action of inflation on gold, that relies purely on capital growth to counter devaluation by inflation, has to be taken in to account. The poster simply grabbed hold of a chart that seems to fit what was clearly no more than a prejudiced comment on gold.

So your problem is not with the fact that the poster was correct to say that gold can be a terrible store of value even over periods of more than half a century, just that you suspect they did not know they were correct when they posted it because they didn't know what they were posting. Well, I don't think that will convert many people to your side.

These inflation adjusted charts have a validity to them

Yes. I expect that is why someone has posted them to counter your bullishness - because they are valid.

Your bullishness is understandable given your circumstances, i.e. as someone who holds a lot of gold, it is great if the price is pushed up by others being convinced to also buy these expensive pieces of shiny metal even though they may decline in value in real terms over multiple generations. Their purchases help your wealth.

But the truth is that over time, inflation+ growth is achieved.

According to the inflation adjusted charts which you say have a validity to them, inflation+growth was not achieved from 1935 to 2000, nor was it achieved from 1980 to 1990 or indeed from 1980 to any time since (even including the 2011 peak). So a bland 'over time, clearly you will get your money back in real terms and then growth on top' is simply not something that can be held to be true as it won't have worked for very large numbers of people.

Your only counter seems to be "ah well if you had bought every year from 1935 to now or1980 to now then you would overall be in profit even if you had bought some in 2011". This only works if you can afford to keep investing the same real-terms amount every year. But most importantly, the reason it works is that there are very long periods indeed where the price languishes below its peaks, during which time the average person who was unfortunate enough to have bought during a relatively high period you would be kicking themselves that their supposed safe store of value was not safe and reliable and low volatility after all.

This is sharply brought in to focus, when you go from the post Nixon decision to abandon gold price fixing in 1971, and let the price of gold float..._

The drastic change after 1971 shows that the gold had been held at something different to its open market price, which is not disputed. That doesn't mean that you can legitimately expect to benefit from that same surge today. It is consigned to the history books, just a quirk of history that allows you to claim a big boom in the price of gold over a time period beginning in 1970, but you can't infer that those sort of gains are actually on the table for a new investor today.

As of 1970/71, the reason there was so much capacity to go up was that it was artificially fixed and it had lost two thirds of its real terms value in the thirtyfive years since 1935. Yet even after that big boost from 1970/71 levels, another thirty years later (2000/2001 ish) it was still only half the real terms price from 1935.

DiggerUK

Well bowlhead, you use your normal three score and ten words, when one would suffice.
The indexed chart shows clearly, that gold has beaten inflation more than not. Only your grandad, followed by the period around January 1980, and the last spike around September 2011 show times when you would be crying if you bought everything in those periods.

Only a fool goes all in on any investment at one time. My arguments to average in over time is wise counsel. As to your foolish grandfather, he would now need to realise in excess of $630 to be quids in, today's price is $1190. Pointing out that had he been selling in 2000 he would be crying, ignores the simple truth of how he could have avoided such a disaster, by averaging in either side of the mid 1934 date you picked.

Your nonsense prejudice against gold comes in to focus when you claim I am trying to manipulate the gold market up, by persuading MSE posters to buy. Have you any idea how many million ounces are traded on the Over The Counter London market each day? What buying force do you think can be unleashed from those visiting MSE..._

grey_gym_sock

DiggerUK wrote: »

Only a fool goes all in on any investment at one time. My arguments to average in over time is wise counsel.

and what is your strategy for when to sell gold? never?

we've established that the price can be unfavourable for selling, so you might need to wait for 10 years, or 20 years, or 50 years, or more, until you can sell without making a loss (after inflation). i know some people are having relatively long retirements nowadays, but that's still too long for anybody!

so basically, gold is a way to preserve the real value of your capital, providing you're never going to spend it. who does that suit?

well, if you have more money than you know what to do with - you own you home, mortgage-free, and you have secure index-linked pensions which cover your spending needs and wants - you could choose to put any surplus capital in gold. assuming that you also don't care about how much it will be worth for your heirs - because they will be taking pot luck with the gold price at the time.

but let me let you in on a secret: if you have more money than you know what to do with, then you can do what ever you like with it. all in gold. all in cash. all in shares. give it away. bet it all on red. anything you like.

what if you don't have more money than you know what to do with, and you want to preserve the real value of your capital?

can you put up (to some extent) with the price falling temporarily (like gold), providing its likely to recover? if you can, put your money in shares and/or property. their values will fluctuate, but they also tend to make money over time, mainly because they generate income: businesses make profits, some of which they pay out as dividends; and property generates rental income, some of which is left over after paying expenses. so there is a general upward trend in the real value of your capital (assuming you reinvest the income), overlaid with some random-looking upward and downward fluctuations. (whilst gold just has the fluctuations, without the upward trend.)

or, if you want stability, stick to savings accounts/bonds and the like (e.g. national savings certificates, when available). interest rates do broadly more-or-less match inflation. they are certainly usually higher when inflation is higher. the real value of your capital might be shrinking a bit, but only slowly. the end result is similar inflation-matching to gold, but without the wild volatility.

or go for a mixture of high-return-but-volatile assets (such as shares) and stable-but-low-return assets (such as cash). some kind of mixture is the best answer for most people.

digger, i have wondered if you're trying to encourage other people to buy gold in order to boost the value of your own gold. since your posts make so little sense otherwise. i suspect it might be more that you're trying to convince yourself that you haven't made a huge mistake. (though, providing you have sufficient pensions, and don't ever need to spend the gold, it's not that huge a mistake - apart from looking silly.)

DiggerUK

gymsock
Buying equities is always in the hope that the dividends keep coming in. We sold our last equities in August 2007.......Bradford and Bingley. I kept the final piece of paperwork, on it is scribbled the dividends we received, the rest is........
A similar discussion is going on over at the BT thread, rhyming history.

As that same man from history also said, if you put all your eggs in one basket, don't take your eyes off the basket. And I don't.
Truth is our average costs are under £650 per ounce, so no problem.

As to my heirs and successors, we don't give a rats @rse what our gold is worth when we die. We have a bucket list longer than both our arms put together.

Finally, your assertion that I am trying to boost the price of gold, by hoping to get all MSE members buying gold......There are 1.6 million registered users, if I was to persuade them all to buy an ounce a day, it would just about register an uptick.
As many of them are 'Debt free wannabes' and the like, I have decided to give up my fools errand..._

grey_gym_sock

DiggerUK wrote: »

gymsock
Buying equities is always in the hope that the dividends keep coming in. We sold our last equities in August 2007.......Bradford and Bingley. I kept the final piece of paperwork, on it is scribbled the dividends we received, the rest is........
A similar discussion is going on over at the BT thread, rhyming history.

will BT shares go bad? maybe. any 1 share can. putting everything in 1 share would be about silly as putting everything in 1 metal.

well-diversified investment in shares is something else entirely. nowadays, you can spread your money across 1000s of shares, from all around the world, at very low cost. as it happens, that would have have given you a much higher return than gold since 2007. though it won't do better than gold in all periods. but the longer the period, the more likely it is to, and by a larger margin.

As that same man from history also said, if you put all your eggs in one basket, don't take your eyes off the basket. And I don't.

you think you can make the price of gold rise by watching your gold .... riiiiiiiiiiight.

Truth is our average costs are under £650 per ounce, so no problem.

actually, sunk costs don't matter. whether it's gold or shares or property, you shouldn't care what you paid for it. the important question is whether it's worth holding, given what you could sell it for now, and what likely returns and risks are starting here, over whatever timescale matters to you, and compared to the available alternative investments.

in general: if you would buy at the current price (if you weren't already holding a given investment), then you should continue to hold. and if you wouldn't buy at the current price, then you should sell now.

caring about historical costs is a psychological error in investing. a very difficult 1 to shake off - i know i suffer from it myself. but it's worth trying to be aware that it's an error.

but what is your strategy here, more specifically? while the price is above £650, it's OK, so you won't sell. and if it falls below £650, what then?

a) stop loss: you sell as near as you can to £650.

b) you say: it's still OK, because it will rise above £650 at some time in the future.

c) commit seppuku.

d) ...................?

As to my heirs and successors, we don't give a rats @rse what our gold is worth when we die. We have a bucket list longer than both our arms put together.

i'm glad to hear you don't care about heirs, because that's 1 of the 2 criteria that could mean it's harmless for you to hold gold. the other criteria is that you will never need to spend your gold.

so: will you need to spend (some of) your gold in order to go through your bucket list? or can you do it all from your other resources?

if you will need to sell some gold, then you may have a problem. suppose the gold price falls to £400, but you need the price to be £600+ so that you gold will give you enough cash to do the things you want to do. yes, if you wait it will eventually go back to £600. but meanwhile, you're not getting any younger, and you won't want to leave some things (e.g. travel, at least of some kinds) until you're really old. and you might even be dead before it goes back to £600.

another issue is: suppose it falls to £400, and that is still enough to let you do the things on your bucket list. but could you face selling at a loss? or would you wait for the price to rise, and so never do the things you want to do? that would be silly, but it's a psychological trap that it could be easy to fall into.

Zola.

https://www.youtube.com/watch?v=KlhT07G8zGs

Bogle: Gold is not an investment at all!

DiggerUK

gymsock, history shows that equities go bad on a regular basis, and the opposite for gold.

Stop loss, yes. Had some moments in 2015 when it was heading for £700. For an asset to suffer a 40% dive from its high in September 2011, and survive, says more than enough. That was a stress test that gold and Digger Mansions survived well.

If you go to the Over 50's forum you will find a long running thread about living life as a 'SKIER'.......spend kids inheritance enjoying retirement. Sod our heirs and successors they've had plenty off us, we're dying skint..._