Gold (for diversification and balance)

DiggerUK

AlanP_2 said:

DiggerUK said:

Accusing posters of trying to "time the markets" is a criticism  in the realms of a straw-man argument. 

Some do indeed manage to pull that trick off, it's what attracts many to go day trading.

What is being falsely argued  here is that nobody can read the markets or see great dangers, a totally different kettle of fish. That is a falsehood. Digger Mansions did that correctly from the start of the century, eventually putting all our retirement savings in to gold.

sixpence is struggling to revise their game plan going forward to meet an obvious threat to wealth values, which seems to be getting rebuffed on the grounds that everything is hunkey dorey, not possibly on a one way ticket to Palookaville..._

Have you compared your return against what you would have got if left in whatever is was in at the start of the century......
I've seen your posts on gold over time on here and intellectually, as an investment that will increase my wealth over time, I just don't get it, actual numbers may help. 

Our process went from, to, gold. It was over time and didn't set out towards a gold only position, it just ended up there.
Digger Mansions Treasury was in a good state. We thought it best to secure our funds in gold rather than risk it. The wealth in our Treasury Vaults is safe and preserved. We are happy with our decision.

Gold will not make you wealthy, it keeps you wealthy. There are conversations I have had on MSE (back in the mists of time)  were back of a fagpacket calculations show that gold will 'guarantee' you match inflation plus a %ge on top. I believe anybody who only ever put money in to gold would not lose.

We didn't time the markets right, we read them right. We could to a small degree be accused of timing the markets, just not enough to be guilty of such an act. It worked for us.

This is a piece from The Alchemist, it is the publication of the London Bullion Market Association who organise the a.m. and p.m. gold fixes. Read the bio of the author at the end. It has been selected by the LBMA for inclusion in their magazine, so it is hard to believe he doesn't speak without their approval..._

AlanP_2

OK, so gold is a good defensive asset that will match inflation + a little bit in your view, fair enough to invest if that's your belief and yuou don't need a greater return which you don't by the sounds of it.

So what did you "read right" in markets to steer you towards gold and away from an alternative asset choice?

bowlhead99

DiggerUK said

This is a piece from The Alchemist, it is the publication of the London Bullion Market Association who organise the a.m. and p.m. gold fixes. Read the bio of the author at the end. It has been selected by the LBMA for inclusion in their magazine, so it is hard to believe he doesn't speak without their approval..._

I don't doubt that the industry association for the gold market are very comfortable with someone writing a column for their magazine which concludes with the statement that 'bonds are unattractive, equity valuations will fall, the last time we saw this was in the 70s- when those that thrived owned gold'.

The fact that they 'approve' of a bullish statement for the market on which their careers are predicated, does not necessarily mean that it is something that can stand on its own merits to an impartial observer. 

I do agree with you though that gold is not much of a tool for growing wealth, instead as a safe-haven asset it can help to preserve it once you already have the wealth. Generally this would be as part of a diversified portfolio as suggested by OP.

DiggerUK

What we read right was seeing that rates of return for new investors were on the wane.
As early investors in the emerging boom in the 90's we bought 'cheap'. Our returns were good, and continued to be good. We read the signs for the boom right.

As the "no more boom and bust" boom continued we did calculations for the returns for those who turned up late to the party, they were reducing. Ours were still rising, just not as exponentially post millennium. Economists refer to as the declining rate of profit.

That was it, we started to diversify to prepare for retirement. Plan A was Cash ISA's, NSI Index Linked, Premium Bonds and Gold, the rest is history..._

thegentleway

AlanP_2 said:

Have you compared your return against what you would have got if left in whatever is was in at the start of the century, or against a 60/40 equity/bond portfolio (say HSBC Global Balanced as an approximation for that)?

I've seen your posts on gold over time on here and intellectually, as an investment that will increase my wealth over time, I just don't get it, actual numbers may help.

You can backtest yourself at https://www.portfoliovisualizer.com/backtest-portfolio

Portfolio 1 = GOLD*

Portfolio 2 = 60/40

Portfolio Returns

Portfolio performance statistics

Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio	Sortino Ratio	US Mkt Correlation
Portfolio 1	$10,000	$20,739	3.61%	40.85%	117.63%	-48.52%	-87.17%	0.25	0.39	0.11
Portfolio 2	$10,000	$34,631	6.22%	9.05%	21.83%	-20.20%	-30.72%	0.53	0.77	0.99

Over last 20 years, gold has been more volatile and returned less that conventional 60/40 split.
*EDIT: Thanks to DiggerUK for pointing out that GOLD is Barrick Gold Corp's figures
Should have used GLD, which only goes back Dec 2004:

Portfolio 1 = GLD

Portfolio 2 = 60/40

Portfolio Returns

Portfolio performance statistics

Portfolio	Initial Balance	Final Balance	CAGR	Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio	Sortino Ratio	US Mkt Correlation
Portfolio 1	$10,000	$42,336	9.70%	17.42%	30.45%	-28.33%	-42.91%	0.55	0.90	0.08
Portfolio 2	$10,000	$30,539	7.43%	8.94%	21.83%	-20.20%	-30.72%	0.70	1.04	0.99

Over last 15 years, gold has been more volatile but returned more that conventional 60/40 split.
Apologies for mix up

DiggerUK

@gentleway, your figures are flawed. 

Twenty years ago gold was $273 per ounce, $10,000 would have bought 36.6 ounces. At today's prices that would give you a pile of gold worth $74,712.
Even if gold returns to pre coronavirus prices at the start of the year it would be worth $55,772.

Was the code for the mathematical model and algorithms of your calculator written by Greta Thunberg or Professor Neil Ferguson..._

thegentleway

DiggerUK said:

@gentleway, your figures are flawed. 

Twenty years ago gold was $273 per ounce, $10,000 would have bought 36.6 ounces. At today's prices that would give you a pile of gold worth $74,712.
Even if gold returns to pre coronavirus prices at the start of the year it would be worth $55,772.

Was the code for the mathematical model and algorithms of your calculator written by Greta Thunberg or Professor Neil Ferguson..._

Good point. I typed in GOLD instead GLD so that's Barrick Gold Corp's figures Apologies, that was sloppy!

thegentleway

AlanP_2 said:

Have you compared your return against what you would have got if left in whatever is was in at the start of the century, or against a 60/40 equity/bond portfolio (say HSBC Global Balanced as an approximation for that)?

I've seen your posts on gold over time on here and intellectually, as an investment that will increase my wealth over time, I just don't get it, actual numbers may help.

This compares Dow Jones Industrial Average vs gold for last 100 years
https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart

grumiofoundation

thegentleway said:

AlanP_2 said:

Have you compared your return against what you would have got if left in whatever is was in at the start of the century, or against a 60/40 equity/bond portfolio (say HSBC Global Balanced as an approximation for that)?

I've seen your posts on gold over time on here and intellectually, as an investment that will increase my wealth over time, I just don't get it, actual numbers may help.

This compares Dow Jones Industrial Average vs gold for last 100 years
https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart

No no no - Digger decides the time periods for comparison! 

coyrls

grumiofoundation said:

thegentleway said:

AlanP_2 said:

Have you compared your return against what you would have got if left in whatever is was in at the start of the century, or against a 60/40 equity/bond portfolio (say HSBC Global Balanced as an approximation for that)?

I've seen your posts on gold over time on here and intellectually, as an investment that will increase my wealth over time, I just don't get it, actual numbers may help.

This compares Dow Jones Industrial Average vs gold for last 100 years
https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart

No no no - Digger decides the time periods for comparison! 

You can actually set any time period on that Website.