I keep hearing this regarding Gold price going down. Surely, I'm missing something.
Higher interest rates in the United States would increase the opportunity cost of holding gold, an asset that does not earn interest.
After the dot com bust, Greenspam kept interest rates low for a while. However, later he started increasing the interest rate and gold continued to go up. Now, after 2008 crisis, interest rates kept falling to their all time lows. Dollar kept falling as a result. Gold kept gong down to hitting 5+ year low. How ?!?!?!
And now, prospect of interest rate going up driving Gold down further. Is the cause driving the result or result driving the cause?
Comments
The current event with both gold and oil comes down to supply vs. demand economics.
A few years back the miners geered up due to high demand and prices and borrowed to expand production to meet increased demand. Now an over supply pervails and with this falling prices but production will be kept at high levels to service debt load. This demand vs. supply has also taken place with oil with over supply happening resulting in falling oil prices as demand has pulled back but production has been kept at high levels to service debt load.
I opened a position in SGGDX this past fall and did real well in the position with good upward price movement. During the past couple of months there has been a decline in price due to reduced demand for gold and when it hit my stop out price I exited the position.
Simply stated I had the right read for a short term special investment position but not for an extended period of time ... and, for the long term, time will tell the story. I thought since gold was selling back of it's all in cost to mine it was worth the venture.
I'd like to remain agnostic here rather than get into a debate with someone over the relative prospects for either.
However, will note that all trends eventually do reverse. So old Al may be correct looking out 5, 10 or 20 years. He certainly has not been right nearer term.
You noted: "However, all trends eventually reverse. So old ? Al may be correct looking out 5, 10 or 20 years. He has not been right nearer term."
Thanks for noting this to get my brain cells going this morning.
Not related to any precious metals investment directly; but our house would no longer be considered a long term investing household. Even during the late 1990's and into the mid-2000's we became more inclined to sell more often based upon a holding that just could not keep a decent forward momentum.
'Course, a possible conclusion with any of this are the "reports" of frequent traders not keeping up with returns from a more simple index fund in category "x" over a long term.
Changing (selling) a position after 6-12 months is not considered being a trader at this house; but this timeframe is going to have different meanings for different folks.
Except those making dollar cost averaging investments via a company retirement plan (401k, etc), which I consider to be a "long term holding", I don't know what the average portfolio turnover may be here, among MFO members.
Perhaps this would be a good thread to post to this forum. I would expect a variety of responses depending upon age and/or post-retirement.
A quick guess for this house is that our portfolio is always in flux and that the longest holding period average is about 1 year.
Now, we still have a decent return on our invested monies; so we are not "trading/selling" too soon, which could hurt a portfolio.
Okay.........just a few blips from downstate Michigan with only one cup of coffee for the thought process.
Take care,
Catch
Price leaves a footprint in the sand. Price provides the kind of information that I think guide you when first taking a position as well as when it might be time to scale back, take a profit or end a position. This feels a little more like trading than investing, but price matters. Price matters especially in the early stages of a long term investment. Price can be the wind upon your investment's sails or the anchor that keeps your portfolio from moving forward.
The one aspect of price that I have learned to evaluate is how price relates to a simple question that all investor should ask themselves.
Is my investment making 'higher lows' ? (trending higher)
or,
Is my investment making 'lower lows' ? (trending lower)
This rule works for the short term as well as the long term and is best visualized by evaluating price charts.
I like M* verse YahooFinance chart tool since M* is a total return price chart.
Using @Old_Skeet's fund, SGGDX, I created this short video (using Jing) with a few audio comments (my apologies to Hollywood) regarding my 'higher lows' vs. 'lower lows' concept.
screencast.com/t/kpu4POkHXid1
Bonds will always have an associated yield. Hold a bond to maturity and you will receive your yield and your principle. In a low interest rate environment default risk is considerably lower, making bonds safer today as far as default risk is concerned.
So where's the bubble other than in AG nightly bromoseltzer?
individual bond[s] [munis or corporate] are good for long term safe investments if you pick the right ones and just hold it until maturity
for examples Tmobile was giving bond yield ~ 5% previously for 15 yrs, is this a safe investment? I think so. Will company bankrupt? unlikely. so maybe it's reasonable to buy this bond if you like to hold it for awhile.
Some of this concern explains why I have overweighted commodities recently (and underweighted stocks and bonds). As proof that I'm not very smart, I've had my head handed to me on a platter with the GSCI off 40% over the past year.
I feel your commodity pain.My total portfolio peaked about July 3rd 2014.Caught some falling knives since.
Major Asset Classes | July 2015 | Performance Review
http://www.capitalspectator.com/major-asset-classes-july-2015-performance-review/
Health Care & Energy: US Sector Momentum At The Extremes
The US stock market has witnessed its share of turbulence in recent months, but the jump in price volatility hasn’t dented the leadership role of the health care sector. At the opposite extreme: energy companies continue to dominate the field in the category of downside momentum.
Here’s a list of the sector ETFs cited above, with links to summary pages at Morningstar.com for additional research:
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Energy (XLE)
Financial (XLF)
Healthcare (XLV)
Industrial (XLI)
Materials (XLB)
Technology (XLK)
Utilities (XLU)
Telecom (VOX)
http://www.capitalspectator.com/health-care-energy-us-sector-momentum-at-the-extremes/#more-5839
Whoa!!!! Post of the year and more. Trouble is, one of the former posters in years past who babbled on about price had the bad habit of hanging with large losing positions when price moved against him. Easy to talk the talk but not so easy to do the walk.
Now, then, it would seem to me all those fund managers holding Gold dunno what they are doing. I'm not talking about gold/precious metals funds or even PRPFX since that's their mandate. I'm talking about APPLX and Co. As pointed out by someone above, if Gold is an opportunistic position to invest in for an active fund manager, it clearly demonstrates they used same kind of logic I did in my opening post for holding gold. I can be stupid, but not my managers - that's why I hired them, so they know the difference between interest rates, dollar and gold price direction and read the tea leaves better than I do.
I just hope I'm not wrong about holding CGMFX based on his extreme short treasury position. If Fed starts increasing interest rates in September and CGMFX starts moving down, I'm not sure I can take it. 2+2 has to be equal to 4 at least some times.
Meanwhile I have small positions in TGLDX and FSAGX (bad decision to buy recently after Gold tanked). I will hold for now.
Gold is a complicated play with so many different facets to demand . . . and price. The greatest impact these days is the strength of the dollar and the POG being expressed in terms of the dollar.
While I still recommend a core holding in the PM's, the trade is sketchy at best. Bull markets in the commodities normally run 12-15 years. The bull in pm's started in '02. er what year is it?
Bee had an interesting postie about following price trends that I really equate to momentum investing. By this, you can take a testing position but only add to it if it's making money. You set your stop loss at 5-10-15% (depending upon volatility of the play) but only increase your 'test position' as the price is moving with you. You scale in your play gradually 'with the momentum' of the price in your favor.
This would certainly apply to any buys in the pm market. Be careful. While I really think we're near the short term bottom and that there is sufficient demand from both the int'l CBs and survivalists to serve as a floor. Also, please remember that the leverage is with the junior miners if this really is the bottom.
and so it goes,
peace,
rono
My thought is to think of these beat up dividend paying equities as you would a marked down bond.
Collect a dividend stream until such time that the company (sector) rebounds.
For example FCX pays a dividend of 2%. Dr Copper is at a six year low.
BP pays a 6.7% divided and its share price is close to what it was in 2009.
We may be in an extended period of lowflation.
Why not receive an income stream (dividend payment) while you wait for these sectors and the global economy to grow again.
and so it goes,
peace,
rono
With oil I fear that you'll get that push under $40 and if that holds long enough, you'll get more defaults/distress in smaller companies and a major may be forced to cut their dividend. If that happens, that's when you get the panic and perhaps that's when you buy.
Edited to add: just after I write this, the next segment on "Fast Money" on CNBC is a discussion of which of a few oil majors may cut its dividend.
I think Canadian Natural Resources (CNQ) is cheap at almost book value (I thought it was cheap at $30, too - apparently not) but it would absolutely go lower. Conoco with a 6% yield? We'll see how sustainable that is if the turn doesn't happen for a while.
Combo pipeline/services co Gibson Energy (GBNXF) is interesting at these levels. I wish I could reinvest dividends.
I'll continue to own Intercontinental Exchange (ICE) and CME (CME), which have held up quite well during this drop in energy. Heck, ICE was up today.
FCX already cut the dividend earlier this year, didn't they? Glencore has basically been my worst investment ever, but I'm still not selling it.