Help to invest in gold?

Brown_Bear

short_butt_sweet wrote: »

the point should be: trust them to do what? on some things, i wouldn't trust them at all. but i'm very confident that they will make sure that the FSCS guarantees are honoured.

inflation is a risk, when holding cash deposits. usually, the interest on cash is somewhere near inflation; it certainly does tend to be higher when inflation is higher. so the risk is not quite so bad. however, in the worst case, there could be a period of some years during which inflation is a lot higher than interest rates.

you are correct than holding gold gives some protection against inflation; but so do shares. gold is also very volatile in price; and so are shares. however, shares tend to give higher returns than gold in the long run.

gold is only likely to match inflation on average - i.e. to do about the same as cash deposits - but with wild swings along the way. so generally cash is better than gold, because both gives low returns, but cash is much more stable in value.

shares are likely to give higher returns than both cash and gold in the long run, mainly because they both pay an income (dividends) and can rise in capital value. cash pays an income (interest), but the capital value stays the same. gold pays no income, but can rise in capital value. shares are generally better than gold, because both have very volatile capital value, but shares have higher returns.

that is roughly why gold is likely to match inflation in the long term.

look much more closely at that chart. note that gold has fallen for periods of 10 or even 20 years.

on 1 january 1980, it was £285; by 1 january 2000, it has fallen to £172, a fall of 40%.

but it's much worse than that. because of inflation, to buy the same as what £1 bought in 1980, you'd need £2.68 in 2000. that means the real value of gold had fallen by about 78% over those 20 years. in 2000, 1 ounce of gold had less than 1/4 of the spending power it had in 1980.

so yes, in the long term, gold will probably about match inflation. but how long are you prepared to wait? (and it could go down for longer than 20 years - there's no maximum.)

cash on deposit will also probably about match inflation, and with much less excitement/terror

That is all true from an investment / inflation perspective.
But one of the main advantages of gold is asset protection.

Tardigrade1

There are some harsh words here but please listen to them. Gold is expensive to buy, sell and, in most cases, have someone store for you. Over the very long term, it isn't a terrible hedge for inflation. But it can be very volatile when it wants to be. It is not "safe".



As an aside, safe is not safe over the long term. If I invest £100 today, and have £100 in 10 years time, it is "safe" - but that £100 will buy me far less in 10 years than it would today. So over long periods of time, you have to take some risk. Inflation-linked gilt, gilt or high quality bond mutual funds may possibly be better as a starter for ten, but really you need someone you trust to advice as your intuition is not good.

short_butt_sweet

Brown_Bear wrote: »

But one of the main advantages of gold is asset protection.

but in what scenario? under any even slightly normal scenario, the UK government is very committed to protecting property rights.

taxes may well rise (without even getting into unlikely scenarios). but you could easily lose more in lost returns by trying to evade tax (e.g. if you end up holding low-return gold and not paying tax, instead of holding higher-return shares and paying some tax: the shares will probably give a higher return even after paying that tax).

there is little point in basing your asset allocation on some movie plot disaster scenario. yes, some of those things might actually happen. but it may turn out that you've based your allocation on the wrong disaster movie

Brown_Bear

short_butt_sweet wrote: »

but in what scenario? under any even slightly normal scenario, the UK government is very committed to protecting property rights.

taxes may well rise (without even getting into unlikely scenarios). but you could easily lose more in lost returns by trying to evade tax (e.g. if you end up holding low-return gold and not paying tax, instead of holding higher-return shares and paying some tax: the shares will probably give a higher return even after paying that tax).

there is little point in basing your asset allocation on some movie plot disaster scenario. yes, some of those things might actually happen. but it may turn out that you've based your allocation on the wrong disaster movie

You're right that many threats to assets are unlikely to happen.
But it's a small chance of something very bad (losing all your money and being hungry on the streets).
It also depends on an individual's personal situation (friends, family, creditor risk etc).

That's why I consider physical gold an insurance for emergencies - not an investment.

Apodemus

Please also consider the market timing problem, which is critical. You have no way of knowing whether gold is currently over or under valued. Gold is currently up about 12% on its price six months ago (Yay!), but about the same as it was a year ago (boo!), or about 30% up on three years ago (Yay!) and the same as it was five years ago (even more Boo!).

The price at the point when you buy is probably the most critical element and at present it is close to the same peak it has reached four times in the last five years. This time might be a breakthrough or it might ease off again, nobody knows, but I think the outlook would be better if it was at a price nearer the bottom of its five year range.

newtoinvest

I'd advise spending some time reading about what investing is and how to create a portfolio which is designed for your needs.

dealer_wins

OP if you would elaborate a bit im sure you will get some very helpful replies.

Is this £30K your entire savings?

Do you have sufficient income without using the £30K?

Long term what are the plans for this money?

Brown_Bear

Apodemus wrote: »

Please also consider the market timing problem, which is critical. You have no way of knowing whether gold is currently over or under valued. Gold is currently up about 12% on its price six months ago (Yay!), but about the same as it was a year ago (boo!), or about 30% up on three years ago (Yay!) and the same as it was five years ago (even more Boo!).

The price at the point when you buy is probably the most critical element and at present it is close to the same peak it has reached four times in the last five years. This time might be a breakthrough or it might ease off again, nobody knows, but I think the outlook would be better if it was at a price nearer the bottom of its five year range.

The best way to deal with such price volatility is to buy at regular intervals.
Disadvantage is that smaller amounts mean more higher purchase costs and higher premiums.

In many cultures people buy gold regularly with their wages throughout life.

The problem here is that saving in fiat currency and then buying gold in bulk can expose to volatility risk.

Obviously, many would argue that the gold price is not volatile at all - it's the fiat currency that is volatile.

Flobberchops

Brown_Bear wrote: »

For asset protection - go for physical gold (not silver).

Why not silver? I was under the impression that silver was undervalued at the moment whereas gold is not a particular bargain at current prices.


OP: I'm a (very) modest precious metals stacker myself so I'm sympathetic to many or your reasons for holding. But if that £30k represents all, or even just most, of your investment cash then I would really discourage going 100% precious metals. You have to balance the probability of the apocalypse happening and the UK becoming an Orwellian dystopia, against the commonsense advice against putting all your eggs in one basket. Even if you wanted to earmark a full £10k of this money for metals - an enormously disproportionate allocation according to conventional wisdom, but hey, it's your portfolio - the remainder could be diversified among several FSCS protected institutions earning tax-free interest.


Is there any reason you decided to invest solely in gold? Why not silver, too? In a SHTF scenario silver would be more easily tradeable for everyday commodities and would represent less of a personal risk than rocking up to the trading post with a gold coin in your pocket worth a month's salary. Silver is sensibly priced at the moment with a favourable ratio to gold, and can be sourced VAT free if you use a Euro seller (may change after Brexit!). So, at the very least I would encourage you to diversify between Gold Sovereigns and Silver Britannias.


Lastly, if you're truly worried about societal collapse and civil unrest, are you also investing in a robust home security system? A decent vehicle? Medical supplies and first aid training?

Brown_Bear

Flobberchops wrote: »

Why not silver? I was under the impression that silver was undervalued at the moment whereas gold is not a particular bargain at current prices.

Because silver bullion is harder to get hold of (in terms of paying cash and not paying VAT).
If you get it delivered from Europe - your details are on a list somewhere.

Plus it's bulkier to store discretely.

Silver is probably a good option for those living in outback USA (with plenty of space etc. But not so practical if you live in a high rise block of flats in the UK.