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Has Gold Been A Good Investment Over The Long Term?
Edmond said: "AU is not an investment ... Its insurance."
I like that. But instead of "insurance", I'd call it a hedging tool used by money managers to hedge other risk positions. Than again, "insuring" against various unforeseen events that could trash most paper assets is, I guess, a type of hedging.
I think charting the highest performing asset over 100 or 500 years and than promoting that single asset to the exclusion of all others constitutes a gross oversimplification of the investment process. If that's all there is to investing, let's say "Good Bye" to bonds, real estate, cash, precious metals, fine art, collectables, and an assortment of other alternative assets that help carry us through those periods when equities fall flat on their face.
Mr. Siegel wrote a book. "Stocks for the long run" - or something like that. Wonder how well that would have sold in 1929 or 2008?
I went to Publix today to trade Gold (currency) for Chips and Beer, you know what they said?..... Think I'll try the gas station or Wells Fargo for cash...you think? ....
I went to Publix today to trade Gold (currency) for Chips and Beer, you know what they said?..... Think I'll try the gas station or Wells Fargo for cash...you think? ....
Edmond put it perfectly - gold is the monetary equivalent of an insurance policy.
"Mr. Siegel wrote a book. "Stocks for the long run" - or something like that. Wonder how well that would have sold in 1929 or 2008?"
Cheerleader Siegel predicted 2008 would be a good year, too. "By June, the subprime-mortgage disaster will ease. Although delinquencies will have risen, the foreclosure crisis will ebb as most lenders make deals with beleaguered mortgage holders. As the housing crisis eases, the flow of credit will return to more normal levels and lending will revive. However, home prices will keep falling or remain stagnant at best. Prices of real estate just got too high during the last boom, and down cycles for housing last much longer than they do for the stock market."
"Prospects for stocks. Shares should have a good year, returning 8% to 10%. Stocks will rise as economic growth picks up in the year's second half and head winds from the credit crisis ease. Earnings will take a hit in the first quarter of 2008, but profits will begin to recover by the second quarter. Stocks are reasonably valued, even when priced against poor earnings. Once earnings increase, stock returns will be considerably better. Financial stocks, by far the worst-performing sector in 2007, could well be the best in 2008." (http://www.kiplinger.com/article/business/T019-C000-S002-my-forecast-for-2008.html)
Tampabay February 15 Flag I went to Publix today to trade Gold (currency) for Chips and Beer, you know what they said?.....
Tampa (wish I was THERE today, Florida is warmer than most places this President's Day).. I am sorry your local grocery would not take gold coins. Tell you what though, I will be happy to exchange some chips and beer for your AU. All the chips you can personally carry for each 1 oz AU piece. Sound like a deal?
@hank. T-bills is a reference to cash. it's called 'cash equivalents' in the contemporary fund documents. these are usually short term treasurys with maturities under 12 mos.
so the jeremy siegel's chart represents that gold underperformed cash over the long-term.
Gee - Thanks Fundalarm. (1) Cash should, over longer periods of time, pay a rate of interest that is at least equal to inflation. Correct? (2) Since gold is a "thing" (rather than an interest-bearing instrument) it should roughly keep pace with inflation. Right? So they're probably right on the comparison longer term. Shorter term anything can happen. I guess my objection was more to charts being posted to prove a point that lacked the kind of specificity you are here providing.
Now - gold, as many have already explained, has other benefits over cash - things which add to its intrinsic value. Which would you rather look at all day long or wear around your neck? Which would be more useful for bribing a border guard to allow safe passage during a time of war or civil strife? Being heavy, it makes a great paper-weight or door-stop too.
Really she owes a debt of gratitude to @Rono. He convinced me to look at fine jewelry as a real asset (with some investment or insurance value) and it helps keep me out of the dog house. Otherwise I would still consider jewelry more like a fashion accessory, which won't get me to crack the wallet.
I'm not able to travel to London (UK) today to sell my gold for cash. Your post has been flagged to management for solicitation. You must have missed the sign, "No Phishing allowed here".
Wow, I read through this post again. I remember it. A blast from the past. Thanks cristinaperry for bringing it back.
As for gold in 2019, I'm sure opinions would be similiar. I see gold as a play, not a buy and hold investment. I started a "play" in December. Hasn't made much yet but still think over the next year or two it could work out.
Hi @MikeM Being curious, a Chart-O-Matic of 2 gold funds, 2 gold miner funds and a compare against FBALX. The backward look is limited to Nov., 2009 based upon inception of GDXJ.
Nothing against precious metals, and we have played in the past with Fido funds; and their day may arrive again with meaningful gains. I note this from our perspective of having our faces in this area back in the crazy days of the late 1970's-early 1980's; when we were one of those tables set up in a mall buying and selling coins, etc. Fun and interesting times.
ADD: during the 2008-2009 market melt, precious metals didn't do much to protect assets for any meaningful time frame.
For Old_Skeet I have in the past, at times, held some precious metal funds. From my perspective gold is simply a store of value in that in times of uncertainity it usually increases in value as investors seek to reduce risk within their portfolios and buy both gold and silver. However, unless you invest in the miners and producers then there are no earnings to be had from just owning gold or silver by themselves. Thus, for me, this makes them a tradeable play over a long term investment position.
However, I do own a commoditity strategy fund that has offered up some good production for me through the years. There again, I've had to be a shrewd buyer and position into my commodity fund when commodities were out of favor. And, even with this, at times, I've had some dead money.
I'll never buy a PM or miners fund again. Way to volatile for me. I remember my early days here on the fundalarm site (2006-7 'ish). PM and commodity funds were the rage topic and I took the bait. Group-think funds as Junkster coined the phrase. I learned my lesson on that type of stuff.
I'll play a gold ETF, IAU, but no more PMs, or any commodity fund for that matter.
Thanks for the chart @catch22. Speaks volumes against buy and hold. Add one of the PIMCO commodity funds to the mix. PCRIX for example has negative returns for 15, 10, 5, 3 and 1 years.
Although I did make something on GLD and SLV in the years after 2008, the total stock market made quite a bit more. I only held them with a few percentage points of my portfolio so not life-changing, but lesson learned.
Does anybody know what percentage of assets withdrawn from equities, during a crisis, go to US Treasurys vs. gold?
>> When I dig up the can [20y later] to redeem the contents ... the $100 bar of gold will most likely buy me the same suit and loaf of bread it would have when I buried it.
Well, it looks like it depends on the period, as one would suspect. I graphed FSAGX over its lifespan (started end of 1985) and it went from 10k to 43.6k, while inflation that same period went from 10k to just under 23k. But if your start point is 1996 it has just about kept pace with inflation. If your start point is much after then, looks like things are worse most of the time.
Now, I do see that GLD (started end 04) has done better than FSAGX the last 8 years, so again maybe, but GLD has declined since 2012 and mostly flat since the year after that.
So maybe over 20y what you propose is true, and you did say 'most likely', but I am wondering about the basis for what you wrote.
Guess I’d mostly agree with this contributor: “The inflation hedging abilities of gold are not measured over months or years, but centuries. People mistake the very long term performance for the shorter term, thinking gold is going to protect them. My research is very clear that an investment in gold is not a reliable hedge.”
My experience messing around with the stuff from the 70s is that it moves in leaps and spurts - and is likely to move in either direction at just about any time. Hard to find a rhyme or reason for what it does. As markets go, the gold market’s quite thin, so there may be some manipulation going on from big holders or players. Just a guess.
To expect gold to keep pace with inflation day to day or year to year is unrealistic. However, if you’d put $1000 into gold coins or bullion 25 or 50 years ago and buried it, it certainly would buy you more today than had you stashed away $1000 in dollar bills in a vault somewhere. So yes, you got some inflation protection.
Overlooked in a lot of these analyses is that many other things also appreciate over time and also offer inflation protection. Think real estate, equities, lumber, etc. And in all honesty, many other investments would have done better most of the time.
I maintain a small exposure to a mining fund. As Mike noted the miners are more volatile than the metal - though they usually run in the same direction. I could probably develop a pretty good bull case for gold today. But it wouldn’t necessarily prove correct.
Comments
Regards,
Ted
I like that. But instead of "insurance", I'd call it a hedging tool used by money managers to hedge other risk positions. Than again, "insuring" against various unforeseen events that could trash most paper assets is, I guess, a type of hedging.
I think charting the highest performing asset over 100 or 500 years and than promoting that single asset to the exclusion of all others constitutes a gross oversimplification of the investment process. If that's all there is to investing, let's say "Good Bye" to bonds, real estate, cash, precious metals, fine art, collectables, and an assortment of other alternative assets that help carry us through those periods when equities fall flat on their face.
Mr. Siegel wrote a book. "Stocks for the long run" - or something like that. Wonder how well that would have sold in 1929 or 2008?
Gold is a hedge for the long term holder. For myself it is a trade.
As for the "buying groceries with gold"...old.
Edmond put it perfectly - gold is the monetary equivalent of an insurance policy.
"Mr. Siegel wrote a book. "Stocks for the long run" - or something like that. Wonder how well that would have sold in 1929 or 2008?"
Cheerleader Siegel predicted 2008 would be a good year, too. "By June, the subprime-mortgage disaster will ease. Although delinquencies will have risen, the foreclosure crisis will ebb as most lenders make deals with beleaguered mortgage holders. As the housing crisis eases, the flow of credit will return to more normal levels and lending will revive. However, home prices will keep falling or remain stagnant at best. Prices of real estate just got too high during the last boom, and down cycles for housing last much longer than they do for the stock market."
"Prospects for stocks. Shares should have a good year, returning 8% to 10%. Stocks will rise as economic growth picks up in the year's second half and head winds from the credit crisis ease. Earnings will take a hit in the first quarter of 2008, but profits will begin to recover by the second quarter. Stocks are reasonably valued, even when priced against poor earnings. Once earnings increase, stock returns will be considerably better. Financial stocks, by far the worst-performing sector in 2007, could well be the best in 2008."
(http://www.kiplinger.com/article/business/T019-C000-S002-my-forecast-for-2008.html)
February 15 Flag
I went to Publix today to trade Gold (currency) for Chips and Beer, you know what they said?.....
Tampa (wish I was THERE today, Florida is warmer than most places this President's Day)..
I am sorry your local grocery would not take gold coins. Tell you what though, I will be happy to exchange some chips and beer for your AU. All the chips you can personally carry for each 1 oz AU piece. Sound like a deal?
so the jeremy siegel's chart represents that gold underperformed cash over the long-term.
Now - gold, as many have already explained, has other benefits over cash - things which add to its intrinsic value. Which would you rather look at all day long or wear around your neck? Which would be more useful for bribing a border guard to allow safe passage during a time of war or civil strife? Being heavy, it makes a great paper-weight or door-stop too.
Really she owes a debt of gratitude to @Rono. He convinced me to look at fine jewelry as a real asset (with some investment or insurance value) and it helps keep me out of the dog house. Otherwise I would still consider jewelry more like a fashion accessory, which won't get me to crack the wallet.
---------edited by chip to remove a link to a UK site for selling gold -------
I'm not able to travel to London (UK) today to sell my gold for cash.
Your post has been flagged to management for solicitation. You must have missed the sign, "No Phishing allowed here".
Go phish elsewhere.
As for gold in 2019, I'm sure opinions would be similiar. I see gold as a play, not a buy and hold investment. I started a "play" in December. Hasn't made much yet but still think over the next year or two it could work out.
Being curious, a Chart-O-Matic of 2 gold funds, 2 gold miner funds and a compare against FBALX. The backward look is limited to Nov., 2009 based upon inception of GDXJ.
Chart
Nothing against precious metals, and we have played in the past with Fido funds; and their day may arrive again with meaningful gains.
I note this from our perspective of having our faces in this area back in the crazy days of the late 1970's-early 1980's; when we were one of those tables set up in a mall buying and selling coins, etc. Fun and interesting times.
ADD: during the 2008-2009 market melt, precious metals didn't do much to protect assets for any meaningful time frame.
However, I do own a commoditity strategy fund that has offered up some good production for me through the years. There again, I've had to be a shrewd buyer and position into my commodity fund when commodities were out of favor. And, even with this, at times, I've had some dead money.
I'll play a gold ETF, IAU, but no more PMs, or any commodity fund for that matter.
Thanks for the chart @catch22. Speaks volumes against buy and hold. Add one of the PIMCO commodity funds to the mix. PCRIX for example has negative returns for 15, 10, 5, 3 and 1 years.
Does anybody know what percentage of assets withdrawn from equities, during a crisis, go to US Treasurys vs. gold?
>> When I dig up the can [20y later] to redeem the contents ... the $100 bar of gold will most likely buy me the same suit and loaf of bread it would have when I buried it.
Well, it looks like it depends on the period, as one would suspect. I graphed FSAGX over its lifespan (started end of 1985) and it went from 10k to 43.6k, while inflation that same period went from 10k to just under 23k. But if your start point is 1996 it has just about kept pace with inflation. If your start point is much after then, looks like things are worse most of the time.
Now, I do see that GLD (started end 04) has done better than FSAGX the last 8 years, so again maybe, but GLD has declined since 2012 and mostly flat since the year after that.
So maybe over 20y what you propose is true, and you did say 'most likely', but I am wondering about the basis for what you wrote.
https://www.reuters.com/article/us-gold-inflation/gold-as-an-inflation-hedge-well-sort-of-idUSKCN1GD516
Guess I’d mostly agree with this contributor: “The inflation hedging abilities of gold are not measured over months or years, but centuries. People mistake the very long term performance for the shorter term, thinking gold is going to protect them. My research is very clear that an investment in gold is not a reliable hedge.”
My experience messing around with the stuff from the 70s is that it moves in leaps and spurts - and is likely to move in either direction at just about any time. Hard to find a rhyme or reason for what it does. As markets go, the gold market’s quite thin, so there may be some manipulation going on from big holders or players. Just a guess.
To expect gold to keep pace with inflation day to day or year to year is unrealistic. However, if you’d put $1000 into gold coins or bullion 25 or 50 years ago and buried it, it certainly would buy you more today than had you stashed away $1000 in dollar bills in a vault somewhere. So yes, you got some inflation protection.
Overlooked in a lot of these analyses is that many other things also appreciate over time and also offer inflation protection. Think real estate, equities, lumber, etc. And in all honesty, many other investments would have done better most of the time.
I maintain a small exposure to a mining fund. As Mike noted the miners are more volatile than the metal - though they usually run in the same direction. I could probably develop a pretty good bull case for gold today. But it wouldn’t necessarily prove correct.