Re: How high will gold go?
Quote:
Originally Posted by
Chicagoeditor
As a birthday present, my folks gave me a set of gold coins they purchased a couple of years ago. Current value is around $2K. What is the outlook for gold? I don't need to cash them in; I'm just curious. (And I want to know what I should be monitoring to watch their worth.)
Nobody knows. There are a million variables at play. Idiots will give hundreds of reasons why gold will go up. But, what if those scenarios have already been priced in?
Lets look at some of the main reasons people invest in Gold.
i) Hyperinflation: People have almost priced in 100% possibility of hyperinflation. Even if there is an itsy bitsy chance that we may have deflation, Gold prices may go down
ii) Supply & Demand: Prices go up, Demand goes down. Even if there is demand for Gold not everyone can afford Gold at $1000/oz
iii) Gold will always go up: Just like Tulip Bulbs and Internet Stocks and Real Estate
iv) Countries will go back to Gold Currency: In their pipe dream. Gold can support only so much currency (probably 10% of the World GDP). The World is Wealthier now because they kicked Gold out as a currency
Re: How high will gold go?
CE, I'd expect it to go A LOT higher than it is now. As you probably know we are in something of a commodities bull market. How big and how long depends upon who and what you read.
Many have been suggesting for several years that this is a commodities supercycle, and others that this is a Kondratieff cycle. Either will be excellent for the long-term outlook.
In the short-term, who knows. But in the long-term - several years away - the price could easily be double the present value. A doubling from here in, say, 5 years time, really wouldn't surprise me.
That might sound like I am being stupidly bullish, but I have been following the gold market for a number of years. I'd have to look at my back issues to figure out when this was, but I first tipped gold to my newsletter readers at US$338 per oz. And I thought I was late into the game...
Something worth noting though, is that your coins may or may not have numismatic value as well. That can influence prices significantly depending upon the supply and demand of the coins.
The short answer is, hold on to them.
Best wishes,
Stuart
Re: How high will gold go?
I've been accused of being a 'gold bug' so I'll try to keep my comments down to the factual ...
Gold has always risen along with inflation in other commodity prices ...
Gold has always risen in response to a heightened level of 'fear' ...
Re: How high will gold go?
No doubt about that. Although the underlying value of gold is pretty much Marginal Cost of extracting it, Gold hawkers prey on clueless idiots to inject fear with misinformation about the real value of Gold.
Gold would make perfect sense if countries revert to Gold Currency, but again when World GDP is dependant on million factors other than gold, it makes no sense for a country to tie itself to gold and choose wretchedness & poverty over prosperity and economic growth through fiat currency.
No Advanced country is going back to gold.
Re: How high will gold go?
to : "No Advanced country is going back to gold."
Way too advanced in my view, to see the true value of the yellow metal.
Re: How high will gold go?
Understanding the gold market is really all about figuring where the financial strength really lies in the world. Major western governments have been sellers of large amounts of gold over the past decade.
In contrast, China has bought incredible amounts. So have the Indian and Chinese populations - both as jewellery and investments.
Depending upon your viewpoint, what xanfiles says above is either brilliant or idiocy.
Much of the prosperity we have in modern economies is due to fiat currency and it's expansion. That is true. However, it is more complicated than that and actually it isn't paper currency but the creation of debt that has fuelled the growth. The fiat currency has simply enabled the debt creation.
On the other hand, massive debt - personal, corporate and government - could easily be the cause of a future downturn in all our finances. After all, debts do have to be repaid.
And as you may know, debt and monetary creation are the drivers of increased rates of inflation. Gold certainly isn't the cause of inflation.
Since gold is unencumbered of debt in a way that paper currency is not, it can be argued that gold is where financial strength lies. It is not a productive asset and does not earn interest or dividends and actually costs money to store it securely. But the owner does own a real tangible asset.
Re: How high will gold go?
I have been pondering the same Chicagoeditor. I don't mean to derail this, but perhaps asking might help answer your question as well:
I have read that the price gold yields runs in direct relation, which has typically been parallel, to oil prices; however, gold has been seeing atypical dips while oil continues to peak. My speculation: Investors are buying grain for food vs. ethanol in light of recent published reports revealing that ethanol grain are environmentally and economically counterproductive (you *wouldn't believe* their proposed alternative, but I digress). I've also read reports that high profile investors have been pulling out of gold recently...
My speculation: All roads imply that we will be witnessing the price of gold inflating, capping out and possibly, bottoming out.
In light of the current global "food shortage" and all other factors taken into consideration, can rice be the new gold? I believe it is possible that smart investors are selling their gold stocks in order to get in early on grain stock...
:flirt: .
Re: How high will gold go?
^^^ there may be a lot of truth in you assessment that food grains may be the next 'bubble' commodity thanks to biofuels now equating the energy value of food with the energy value of oil. However, unlike the stock markets, the commodities market is relatively small, and the gold market is smaller still. This makes both markets more subject to speculation / manipulation.
Re: How high will gold go?
how would u go about investin in "rice"?
Re: How high will gold go?
^^^ rice futures contracts on the comex. Of course, trading on the commodities exchange requires a commodity brokerage account, which is different from a stock brokerage account. Because the minimum size of commodities contracts is rather large in dollar terms, and because the risks of losses are perceived to be high, getting approved for a commodities brokerage account usually requires a good credit rating plus at least five figures to invest. The reason for this is that where rice is concerned, the minimum futures contract is 2000 * 100 lbs of rice ... which at a current price in the ballpark of $21 per 100lbs = a $42,000 minimum contract buy-in price. Of course most traders employ margin borrowing to get in the market with less money invested, but this can also lead to 'margin calls' causing a forced sale of your investment at an inopportune moment. Like many other lucrative investments, commodities are also geared toward 'rich' investors, with little opportunity for Joe Sixpack to participate directly.
Re: How high will gold go?
...And I need to buy our wedding rings soon, before it goes up higher. Need to be plain gold bands, Jewish ceremony. Wedding is 6/6/09. Should I wait?!! I assume no...
Re: How high will gold go?
Quote:
Originally Posted by
Adelina
to : "No Advanced country is going back to gold."
Way too advanced in my view, to see the true value of the yellow metal.
Adelina,
Every smart person on this earth have figured Gold is a hindrance to a Nations progress.
Think about advanced countries like Hong Kong and Singapore and imagine if it were run by idiots who thought gold was the best currency. Those countries would have lived in wretched poverty.
Stuart also makes a comment about debt economy. If every investment by the government was made only after we had saved enough, we would have lived in a very poor economy.
Clueless Idiots running shady web-sites don't understand the concept of NPV (Net Present Value). That's why they don't understand debt economy.
Simple minds don't have a complete picture of economics. Yet they write blogs. Predicting doom & gloom and saying George Bush/Fed are idiots draws in lot of other stupid people and is a sure way to make money of Google Ads. If they were really smart people they don't need those pennies from Google Ads. But I'm sure in the end the returns from Google ads make them more money than any other investment they make
One more thing, unlike other commodities Gold don't get used up. The 4,500 Million Tonnes of Gold we output is just piling up and piling up. The only practical application of Gold is jewelry. But if Gold prices go up, how many can really afford jewerly?
So Gold is neither a consumable commodity nor it is Picasso to have its worth going up every decade.
Re: How high will gold go?
Quote:
Originally Posted by
Melonie
^^^ rice futures contracts on the comex. Of course, trading on the commodities exchange requires a commodity brokerage account, which is different from a stock brokerage account. Because the minimum size of commodities contracts is rather large in dollar terms, and because the risks of losses are perceived to be high, getting approved for a commodities brokerage account usually requires a good credit rating plus at least five figures to invest. The reason for this is that where rice is concerned, the minimum futures contract is 2000 * 100 lbs of rice ... which at a current price in the ballpark of $21 per 100lbs = a $42,000 minimum contract buy-in price. Of course most traders employ margin borrowing to get in the market with less money invested, but this can also lead to 'margin calls' causing a forced sale of your investment at an inopportune moment. Like many other lucrative investments, commodities are also geared toward 'rich' investors, with little opportunity for Joe Sixpack to participate directly.
And thank god for that. Joe Six Packs would be reading clueless websites and be investing in commodities at wrong times and losing shirts and homes
Re: How high will gold go?
"Think about advanced countries like Hong Kong and Singapore and imagine if it were run by idiots who thought gold was the best currency. Those countries would have lived in wretched poverty."
Hm, Xan, do you know that the Asians have always had a lot of respect for precious metals? Do you know that Asian are buying gold with both hands right now?
Of course the bankers don't want us to like and own gold. We'd become savers for once and not borrow from them to create new and new bubbles. There are times for investors and there are times for savers. Gold allows you to save for a rainy day. Fiat money depreciates every day.
The question of saving becomes ever so more important for people who are close to retirement. No fiat currency provides a safe way of saving and living off your savings when you can't work any more. You have to constanstantly reinvest your money in order to stay ahead of inflation, or even just to break even with inflaton. There are times when it's smarter to save what you have than invest in a new venture. Those are the time of inflation, political and economic instability, and wars.
Have you ever been in a situation where the currency of your country is not accepted any more? When it's devalued in a matter of days? When you can't buy anything with it and so all the work you've done to make that money is gone? Well, I have. Think it can't happen here?
Gold is not an investment, it's insurance.
Re: How high will gold go?
Quote:
Originally Posted by
Adelina
"Think about advanced countries like Hong Kong and Singapore and imagine if it were run by idiots who thought gold was the best currency. Those countries would have lived in wretched poverty."
Hm, Xan, do you know that the Asians have always had a lot of respect for precious metals? Do you know that Asian are buying gold with both hands right now?
Of course the bankers don't want us to like and own gold. We'd become savers for once and not borrow from them to create new and new bubbles. There are times for investors and there are times for savers. Gold allows you to save for a rainy day. Fiat money depreciates every day.
The question of saving becomes ever so more important for people who are close to retirement. No fiat currency provides a safe way of saving and living off your savings when you can't work any more. You have to constanstantly reinvest your money in order to stay ahead of inflation, or even just to break even with inflaton. There are times when it's smarter to save what you have than invest in a new venture. Those are the time of inflation, political and economic instability, and wars.
Have you ever been in a situation where the currency of your country is not accepted any more? When it's devalued in a matter of days? When you can't buy anything with it and so all the work you've done to make that money is gone? Well, I have. Think it can't happen here?
Gold is not an investment, it's insurance.
At what price? if you bought gold at $1030, its not insurance anymore, its a hole in your pocket. If you had bought gold in 1970 and had to retire in 2000 its a huge hole in your pocket
The greatest and safest insurance that you can ever buy is an S&P 500 Index
i) Inflation? There are companies including mining in S&P 500 that benefits from that
ii) Drop in dollar? There are companies in S&P 500 that rely heavily on exports
iii) Health Cost going up? S&P 500
iv) Oil & Fuel cost going up? S&P 500
v) Commodities going up? S&P 500
vi) Technology innovation? S&P 500
vii) Recession? S&P 500
viii) Hurricane, Floods, Asteroids? S&P 500
ix) Rain? S&P 500
x) Drought? S&P 500
You get a basket of all these companies for free. If there ever was a free lunch in the financial world, it is a basket of diversified stocks
Why stocks? Public Companies when they issue stock and get money from public there is an inherent promise that they'll give you back 9-10%. Do all companies return that? No. Some companies return more, some less. Some return more in bad years, some return more in good years.
If you toss a coin once, you are never sure of winning it
If you toss a coin 500 times, you are pretty sure of winning around 250 times (It may vary between 230-260, But who cares?)
When you invest in S&P 500 over 30 years, you are tossing a coin around 15000 times and you are almost 99% sure that you'll win around the average of 7500.
If you invest in S&P 500 over 30 years, you are more likely to get the average of 8-9% returns. If by bad luck you get 7.5%, you are still fine. If by good luck you get 9% thats great.
But Gold is a single asset and you are tossing the coin only 30 times. Gold's average return has been around 3%. So, even if you win you are a loser compared to S&P 500
So, by investing in Gold, there is a chance of losing your shirt and in return you are getting lousy payback. It is playing slot machines at Las Vegas. It sounds nice for a naive investor, but behind the scenes it is the worst investment
But just like Vegas, some people do make money By LUCK.
There are many astrologers (aka Chart Readers or Technicians) who think they can predict prices, but all of them are as clueless as someone trying to predict the machine that will give you the next payout.
One smart guy among the Gold Hoarders will ask, "OK, we have all this Gold. What do we do now?". You sure don't want to be holding the bag when that happens. But, nobody can predict when that'll happen.
Finally GDP/Capita of China/India is around $2000. They sure won't be spending $1000 of them buying gold.
New generation Chinese/Indians would rather buy an iPod/iPhone than Gold
Gold also gets recycled from generation to generation.
Re: How high will gold go?
I love this one: "Hurricane, Floods, Asteroids? S&P 500"
Wow, Xan, good luck!
Re: How high will gold go?
Quote:
Originally Posted by
Adelina
I love this one: "Hurricane, Floods, Asteroids? S&P 500"
Wow, Xan, good luck!
Again it takes a certain enlightment to see beauty of diversification. There are companies in S&P500 that have benefited from adverse events. The best part is you don't have to worry about timing the market.
The biggest problem with investing in Gold is you have to time the market. The stress and the resources it takes is mind-boggling. Time which could be spent to improve your earnings 20%
The biggest investing mistake is investing in a Single asset.
Gold has no earnings like Tulip Bulbs and Internet Companies. At least Tulip bulbs dies and Internet companies had the potential of revenues.
If you are worried about Fed printing money, why aren't you worried about Gold miners printing Gold that never gets depreciated or used?
Gold Investors have to worry about the day, when somebody will wake up and ask, "Now we have got this Gold, What do we do?"
Re: How high will gold go?
Xan, an investor always should make an educated guess on how to time the market. Investing in an index is a zero sum game at times when inflation eats up your profits, if you have any. If you invest in anything, you always worry about your investments. Look what happened to people that were buying houses in the past couple of years without educating themselves first on whether that was the best place for their money.
You can inest in increasing your profits at work, but you want to do something with your money rather than just spend it, right? At the moment, we are facing a currency risk. What happens if all your money gets devalued by 20-30% or more in a short period of time? So there is always risk in any investment. It's smart to educate yourself. Think of the baby boomers who will be living off fixed income "safe" investments at the time when they pay for basic necessaties more and more every day.
Gold can become speculative, and if you know what to do, you can make money. You don't want to buy it on a spike up, you want to buy it when the price corrects substantially. Gold is becoming more rare, so it's value should increase with time. Of course, you want to diversify. But if you have a little gold, you'll buy yourself a little piece of mind. Women in some countries wear a lot of gold jewelry on them. It's not only because they love gold jewelry. They look at it as money. If the times get tough, they'll take off that ring and buy food for their family.
Re: How high will gold go?
Quote:
Originally Posted by
Adelina
Xan, an investor always should make an educated guess on how to time the market. Investing in an index is a zero sum game at times when inflation eats up your profits, if you have any. If you invest in anything, you always worry about your investments. Look what happened to people that were buying houses in the past couple of years without educating themselves first on whether that was the best place for their money.
You can inest in increasing your profits at work, but you want to do something with your money rather than just spend it, right? At the moment, we are facing a currency risk. What happens if all your money gets devalued by 20-30% or more in a short period of time? So there is always risk in any investment. It's smart to educate yourself. Think of the baby boomers who will be living off fixed income "safe" investments at the time when they pay for basic necessaties more and more every day.
Gold can become speculative, and if you know what to do, you can make money. You don't want to buy it on a spike up, you want to buy it when the price corrects substantially. Gold is becoming more rare, so it's value should increase with time. Of course, you want to diversify. But if you have a little gold, you'll buy yourself a little piece of mind. Women in some countries wear a lot of gold jewelry on them. It's not only because they love gold jewelry. They look at it as money. If the times get tough, they'll take off that ring and buy food for their family.
Investing in an Index is not a zero sum game.
Investing in an Index is not a zero sum game.
Investing in an Index is not a zero sum game.
Investing in an Index is not a zero sum game.
I can't understand you and Melonie make the same stupid mistake about this
No other Asset class has given you 7% real returns for the past 82 years.
In 1926 S&P was at 15 or something like that. If Indexing was a zero sum game, it would still be at 15 (or grown at inflation rate)
S&P 500 is the only asset class that has consistently given Real Returns over such an extended period
Which part of getting 8-9% returns in my previous example did you not get? This is free money.
This is the biggest mistake people make. No other asset class gives you this high returns with low risk.
As far as timing the market. I don't think that somehow you have better information than the 1 Million traders with all the tools and access have.
What about Macro views? Do you really think that you are the first person to come up with the idea that the dollar will tank?. When you come up with a view, that view is already priced in.
The only timing you can ever do is go against the herd. That requires tremendous discipline like Warren Buffett.
Re: How high will gold go?
I would add that the S&P is NOT a fixed 'basket' of companies. Standard and Poors constantly drops companies from the 500 list, and adds new companies in their place. Thus from one viewpoint investing in the S&P is no different than investing in any other diversified mutual fund or ETF, other than the fact that the selections made by Standard and Poors are 'free' of a management fee !
On the other hand, gold (or silver) is what it is. It is a commodity with intrinsic value ... a real store of wealth that is not dependent on someone making good on a debt in order to provide that value (i.e. US federal reserve note dollars). Gold (and silver) is admittedly NOT a good long term investment since it is not productive in and of itself. However, it is good at 'storing' value to avoid losses under certain economic conditions.
Re: How high will gold go?
xan - you seemed to have missed out on Wall Streets dirty little secret. Long term, roughly 80% of direct investors - ie the public - LOSE MONEY.
I'd also like to add just how lucky we are. To quote you in post 13, "Simple minds don't have a complete picture of economics." We are lucky to have you here to explain it in simple terms. Our simple minds probably couldn't deal with anything else...
Re: How high will gold go?
Quote:
Originally Posted by
StuartL
xan - you seemed to have missed out on Wall Streets dirty little secret. Long term, roughly 80% of direct investors - ie the public - LOSE MONEY.
I'd also like to add just how lucky we are. To quote you in post 13, "Simple minds don't have a complete picture of economics." We are lucky to have you here to explain it in simple terms. Our simple minds probably couldn't deal with anything else...
Yes, 80% of direct investors lose money. I totally believe that number. The reasons are simple
* 80% of direct investors read shady web-sites and follow their advice
* 80% of direct investors try to time the market. They pull out of stock when everybody is selling and usually enter when it is in peak
* 80% of direct investors are over-confident about their stock picking abilities
* 80% of direct investors can't separate skill from luck. If someone said to you that they have beaten the stock market for the past 10 years, these investors immediately give him the title 'Greatest Investor' of our times. If you know basic probability, you'd understand that calling a series of coin tosses correctly is not uncommon as people think. i.e there is more randomness in this world then most idiots admit to
* If 80% of direct investors had simply Dollar Cost Averaged and stopped reading shady web-sites or listened to their uncle. they'd have made enough money.
You can pick an random date from the past and back test Dollar Cost averaging including dividend re-investment for over 30 years and you'd have made between 9% - 15% in nominal returns, which is really fantastic
Investing is simple, But people make it hard on themselves by chasing pipe dreams and waste time by reading idiot web-sites
Re: How high will gold go?
Quote:
Originally Posted by
Melonie
I would add that the S&P is NOT a fixed 'basket' of companies. Standard and Poors constantly drops companies from the 500 list, and adds new companies in their place. Thus from one viewpoint investing in the S&P is no different than investing in any other diversified mutual fund or ETF, other than the fact that the selections made by Standard and Poors are 'free' of a management fee !
On the other hand, gold (or silver) is what it is. It is a commodity with intrinsic value ... a real store of wealth that is not dependent on someone making good on a debt in order to provide that value (i.e. US federal reserve note dollars). Gold (and silver) is admittedly NOT a good long term investment since it is not productive in and of itself. However, it is good at 'storing' value to avoid losses under certain economic conditions.
S&P 500 recycles 5-10 companies every year. On a MarketCap basis of 500 companies that is very very negligble. But, I'm not surprised that you focus on the 0.1% item and totally missing the 99.9% elephant. Consistent with your view of the world.
S&P 500 itself has Gold/Mining companies. So, if you think 2-3% should be invested in Gold, S&P 500 automatically does this for you. Free Lunch & Worry free.
The 1% fee you pay mutual fund guys adds up a lot over 30 years and since these mutual funds try to time the market they underperform. So, you sort of get a double whammy of lower returns and higher fees.
OTOH, S&P 500 doesn't try to time the market when it recycles companies, which is its biggest advantage.
Re: How high will gold go?
Quote:
Originally Posted by
xanfiles1
Investing is simple, But people make it hard on themselves by chasing pipe dreams and waste time by reading idiot web-sites
Xan - have you been conned by a 'shady' website in the past? You have an irrational fear of the web, despite posting all sorts of contradictory advice yourself - on the web.
The 80% figure I was quoting was taken from 'One up on Wall St' by Peter Lynch. Offhand, I don't know when it was written - but the mid 90's I think. Most people didn't even have computers then, so they were not influenced by the web. Perhaps they were being misled by those 'shady' national newspapers...?
And whilst I agree that dollar cost averaging can help the average investor, you need to do a little more reading. I am not going to try and explain the maths behind this - because I probably can't - but unless an investor sells in a certain way, the dollar cost averaging can unwind on the way out and lose them money.
I'll have to do a search for the research paper that explains this and see if I can find a link. But, the point being, that even investing monthly in a diversified fund IS NOT as easy as you think to make profits. You significantly under represent the difficulty in making consistent investment profits.
For the majority of investors, simply picking a fund and putting regular money in will not be particularily profitable. What it will do, however, is get them saving, which is a great start - at least they will actually have some savings.