Questions about gold - newbie investor

Sg28

Ive a nice little pile of gold sovereigns. Purely from an investment point of view I probably wouldnt have bothered but I like coins and I like owning a bit of gold. So I get some enjoyment from them.

Aretnap

Invest in a fishing rod and in ten years time you will own a fishing rod, and all the fish you can eat.
Invest in an acre of farmland and in ten years time you will own an acre of farmland, and ten harvests of wheat.
Invest in a house and in ten years time you will own a house, and ten years of rent from your tenants.
Invest in a share in a company and in ten years time you will own a share in a hopefully larger company, and ten years of its profits being distributed through dividends.
But invest in an ounce of gold and in ten years time you will own... an ounce of gold.

That's the fundamental problem with gold. It's not actually an investment in any real sense - it has no capacity to grow, or to create more wealth. Your hope for a return is based entirely on the hope that one day someone will desire it more than you do today. Maybe they will, maybe they won't. There's no law of nature that says that demand for gold has to increase with time or that it's price has to keep pace with inflation in the long run (a very unambitious investing goal in the first place). Perhaps as the economies of China, India and Arabia develop and capitalism comes of age, people there will start storing their wealth in productive assets instead of shiny metals, as they already mostly do in the West. That really would send the price of gold through the floor...

Millyonare

Gold -- in GBP terms -- on average has risen 20-25% a year, every year, for the past 50 years. It's been a phenomenal investment. (Mostly due to the collapsing pound).

subjecttocontract

Gold has a beauty, an attraction, just look at gold jewelry, its something a buyer can hold in their hand and it doesn't cost very much to own, it makes a great gift. You can't say that about investments. Not everyone views every purchase they make as an investment and let's face it investing can be incredibly boring. I see nothing wrong in holding a few gold items.

Altior

There is something to be said about having a tangible asset, the valuation of which has stood the test of a very long time. There are very very few relatively easily stored assets that can be achieved with, that have intrinsic value and can be easily traded/are liquid. It's a hedge against the collapse of fiat currency at the very least. The pounds that you see on the screen when you log into online banking could become worthless, in fact they are worthless aside from the fact that practically everyone in the nation has faith in the value they represent. 

Prism

Millyonare said:

Gold -- in GBP terms -- on average has risen 20-25% a year, every year, for the past 50 years. It's been a phenomenal investment. (Mostly due to the collapsing pound).

Er, not even close. Its around 6% annualized over 50 years. 

Millyonare

Prism said:

Millyonare said:

Gold -- in GBP terms -- on average has risen 20-25% a year, every year, for the past 50 years. It's been a phenomenal investment. (Mostly due to the collapsing pound).

Er, not even close. Its around 6% annualized over 50 years. 

You need a new calculator 

In USD, 5-10%.

In GBP, 20-25%.

Prism

Millyonare said:

Prism said:

Millyonare said:

Gold -- in GBP terms -- on average has risen 20-25% a year, every year, for the past 50 years. It's been a phenomenal investment. (Mostly due to the collapsing pound).

Er, not even close. Its around 6% annualized over 50 years. 

You need a new calculator 

In USD, 5-10%.

In GBP, 20-25%.

Here is the 50 year gold price chart in GBP, where you can see the price rise from £74 to £1686. That is a yearly return of 6.2% over 50 years.



You are right that GBP has devalued vs the USD - by 47%. Not enough to make much difference over 50 years.

EasyToAssemble01

Thanks for all the advice. It seems that it's good as an "add on" failsafe, but not as an investment as such. 

noble_pigeon

XzavierWalnut said:

I purchased 2 troy ounce bars about 3 years ago from the Royal Mint, because I wanted to own some gold.
A bit disappointing as they are in a sealed cover and if you cut the bars out you lose the authentication, so although I can look at them, I cannot touch the gold bars. You can buy second hand ones from dealers.
The other issue is, now the novelty has worn off, I worry about losing them in a burglary.

Burglars are more likely to steal your TV. Unless they know you have gold and come to look for it they won't bother looking for small hidden items. For most burglars time is precious and they spend as little time in your property as possible. If your gold is well hidden, in an unlikely place it ought to be safe enough.