Gold is an better option for saving?

[aditi]

hi
Now a days gold has become an another tool for saving. Gold is exchange tool also for the payment of crude oil. Gold is like reserve.

Gold prices define the market movement.

So what do you think is an option for saving?

[Jack2012]

Invest in Gold is good mostly because it is one finite recourse, but you have to consider the prices when you buy and sell and many other things. But indeed is a good investment

[BudgetSurgeon]

hi
Now a days gold has become an another tool for saving. Gold is exchange tool also for the payment of crude oil. Gold is like reserve.

Gold prices define the market movement.

So what do you think is an option for saving?

I think everyone should have a portion of their investment portfolio in commodities; namely, Gold. In times of high inflation (and we are bound to see that again in coming years), having Gold in your portfolio will be an excellent hedge. Tread lightly on your purchases now, however. The price of Gold is still at a pretty lofty price, IMO.

Best,

BudgetSurgeon

[Ochayebeers]

Hi,

Hmmm. Gold is a tricky one. I second BudgetSurgeon that gold is a great diversifier and a hedge against currency debasement (most fiat currencies in history have failed - hopefully Nixon didn't doom the dollar as well, but I digress).

However, Buffet doesn't like gold, and says that it has no applications and can't "grow" as such as the value is totally based on demand versus its obviously limited supply. This is a bit like the "greater fool theory" - Tulip Mania anyone? The 80's were a horrendous bear market for gold, as economies made real progress (the UK FTSE 100 index more than doubled)and debts were paid off and inflation was crushed.

But then again, that was then and this is now. Now we have debts that can never be repaid and the UK/US are printing money and the European Central Bank is dong the same thing while protesting that it isn't. Inflation will come, but we have no idea when!

Cheers,

Les

[JBinKC]

A shorter term trader/investor should underweight a portfolio in gold right now because contrary to popular belief the fed's balance sheet hasn't really expanded in the last 2 months but I would closely monitor that data to potentially change that weighting. Long term our national debt won't disappear so it should be a good hedge for potential currency debasement.

For exposure in the sector logically it would be better to own dividend paying gold stocks because you are getting some return of capital like interest on a bank deposit but the big problem is the high price of gold hasn't necessarily been all going to the bottom line to the company hence the companies aren't outperforming the price of the metal and in many cases underperforming.

[Ochayebeers]

Yes,

Gold equities have lagged the spot price but must surely converge at some point! Well, this is what the manager of JPM Natural Resources told me. The new guy that is, (Neil Gregson).

If he's right, then these shares are discounted right now.

[NetSkyBlue]

The time to invest in gold was 6 or 7 years ago when it was $600/oz. Buying now would be buying high. I work in the jewelry business, and I haven't even thought about making a gold purchase since 2007.

[dczech09]

Gold is a bad investment. Lousy track records over the long run. Finite supply limits its ability to really have a whole lot more REAL groth.

If we want to talk about "Tulip Mania," well what about "Gold Mania?" That is what we have right now.

Back in the day, tulips went up like a rocket because they were reported to be such a good investment. They kept shooting up because people wanted more. And since they wanted more, they bought more thus shooting the price even higher. It was all a self-fulfilling prophecy.

Same thing is going on with gold right now. It is all a self-fulfilling prophecy. Gold went from $600/oz up to almost $2,000/oz not because of "intrinsic value" but because of market hype.

Gold does not have intrinsic value. The value of gold is only what another person is willing to pay for it.

Gold is said to be a hedge against inflation, which is a crock. The only reason why it is said to be a hedge against inflation is because everyone and their aunt believes it to be. Another self-fulfilling prophecy.

If our economy fails, gold will not be the standard. Barter will be. People will not want gold because it is basically just another rock that does not do anything. In a barter society, people want food and water (not a fancy rock).

You all are more than welcome to invest in gold if you so wish. But I am telling you that it is not a good investment. It is just a rock.

Just to add onto this...

The closing price of gold in 1792 was $19.39
The closing price of gold in 2011 was $1,531
So that is 218 years
The average annual return = a whopping 2.0243%

[kv968]

Just to add onto this...

The closing price of gold in 1792 was $19.39
The closing price of gold in 2011 was $1,531
So that is 218 years
The average annual return = a whopping 2.0243%

Actually it's less than that. Assuming an annual inflation rate of 2%, $19.29 in 1792 would equate to $1454 in today's dollars. Basically 11% less than what it's trading at now.

Gold, if anything, could be seen as a preservation of wealth not necessarily an accumulation of it. Although with the recent spikes in the price of gold, it would be hard to argue it wasn't a capital producing investment but in the long run, it really isn't. If governments keep printing money and inflation looms, the price could go even higher. However if and when things "normalize" and interest rates start returning to "normal" levels, gold will most likely fall accordingly.

[dczech09]

Actually it's less than that. Assuming an annual inflation rate of 2%, $19.29 in 1792 would equate to $1454 in today's dollars. Basically 11% less than what it's trading at now.

Fair enough. I was talking in nominal return figures, while you are talking real return figures. Either way though, it does not have a very impressive track record over the long run.

[vips]

I think Gold is became a sign of having money. So there are such people who buy gold for their reputation. But I think investment in gold will definitely give good returns in future. So investors are majorly investing in Gold.

[Ochayebeers]

Gold is simply a store of value and one that does very well when fiat currencies collapse through lack of trust. (As they have historically been proven to do). Gold is not given to hyperinflate to worthlessness when spending velocity picks up due to a loss of faith. The very lack of supply that prevents its growth is its biggest strength.

So although it is correct to point out that gold is not really an asset (Buffet makes the point and I alluded to it above)it does function well as a hard currency hence;

"Gold and silver are money, everything else is credit" John P Morgan

Gold is just another currency really, one that does well when governments screw up, which is why I see it as a good diversifier although it is highly priced right now. This is why gold mining shares, which are lagging would seem to be a prudent investment. I would not invest in the commodity itself at the moment.

Gold does not have intrinsic value. The value of gold is only what another person is willing to pay for it.

Are you saying that some things have intrinsic value whereas others are only worth what people are prepared to pay? Surely anything is only worth what people are prepared to pay. And I don't mean to be tautological but surely "what others are prepared to pay" is the intrinsic worth?

[disneysteve]

Are you saying that some things have intrinsic value whereas others are only worth what people are prepared to pay?

I understand what you are saying here but I think the point is that gold doesn't really have any practical use. It is just a hunk of metal. Yes, you can make jewelry or coins or dental fillings out of it, but that's about it. If the apocalypse comes or the economy really crashes seriously, do you want a pound of gold or would you rather have cartons of food, jugs of water, batteries, a generator and fuel, etc. I'll take a loaf of bread, a jar of peanut butter and a gallon of milk over a shiny gold coin that I can't do anything with.

[dczech09]

Gold is just another currency really, one that does well when governments screw up, which is why I see it as a good diversifier although it is highly priced right now.

Can you take a few ounces of gold and go buy a car? Can you take some gold coins and go buy a burger?

Gold is not legal tender, thus it is not a currency.

Also if our economy collapses due to lack of trust, do you know what gold will be worth? Nothing. What good is gold going to do anyone within a broken economy. It cannot be consumed or anything. It is just a rock.

And yes I agree, it is hugely overpriced. Gold never hit $1,000 per oz until 2009. Yet some argue that this is a sign that gold should be the reserve currency. Those people need to read a history book that focuses on Bretton Woods.

Are you saying that some things have intrinsic value whereas others are only worth what people are prepared to pay? Surely anything is only worth what people are prepared to pay. And I don't mean to be tautological but surely "what others are prepared to pay" is the intrinsic worth?

All that I am getting at is that gold's vlue is just what another person is willing to pay for it. There are no fundamentals to support gold's pricing (especially these days). It is all hype and self-fulfilling prophecy.

[NetSkyBlue]

I understand what you are saying here but I think the point is that gold doesn't really have any practical use. It is just a hunk of metal. Yes, you can make jewelry or coins or dental fillings out of it, but that's about it. If the apocalypse comes or the economy really crashes seriously, do you want a pound of gold or would you rather have cartons of food, jugs of water, batteries, a generator and fuel, etc. I'll take a loaf of bread, a jar of peanut butter and a gallon of milk over a shiny gold coin that I can't do anything with.

I'll take seeds, iodine tablets, and a couple of goats

I've never seen why all the hype about gold. Sure it's limited and pretty, but so are plenty of other useless things.