My Take on Gold

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

Re: My Take on Gold

Postby AndrewJackson » Fri Apr 26, 2013 2:06 am

I definitely think before anyone knocks the stuff, they should hold some physical silver in their hands. Holding 60 ounces of American silver Eagles in your hand or a few ounces of gold eagles is quite the experience.
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Re: My Take on Gold

Postby Epsilon Delta » Fri Apr 26, 2013 11:00 am

My chemistry class once toured an Engelhard Industries refinery. We got to pass around a 50 pound gold ingot. It is indeed impressive, even if you didn't know it was worth $150,000. It wasn't shiny however, more of a matte yellow.
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Re: My Take on Gold

Postby dbr » Fri Apr 26, 2013 11:04 am

Indeed gold has the power to own you rather than that you own it.
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Re: My Take on Gold

Postby TO39 » Fri Apr 26, 2013 12:17 pm

Here is a link to an article supportive of owning gold.

http://seekingalpha.com/article/1375731 ... s-analysis


I espeicially liked the chart US Debt and Debt limt Vs Gold.
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Re: My Take on Gold

Postby Epsilon Delta » Fri Apr 26, 2013 12:32 pm

TO39 wrote:Here is a link to an article supportive of owning gold.

http://seekingalpha.com/article/1375731 ... s-analysis


I espeicially liked the chart US Debt and Debt limit Vs Gold.


A classic on how to lie with statistics. The graph does a number of things to overstate the case. If you don't torture the data it still says that both the debt and the price of gold increased from 2000 to 2011, but that's not enough for the author.
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Re: My Take on Gold

Postby TO39 » Sat Apr 27, 2013 1:26 am

so where was the lie? I missed it. To me it looked like as the debt limit was raised, debt followed, and so did the price of gold.
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Re: My Take on Gold

Postby Rick Ferri » Sat Apr 27, 2013 10:44 am

It's not due to an increase in the US debt ceiling. The price of gold tripled in every currency around the globe, even in those countries where there was no increase in government debt.

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Re: My Take on Gold

Postby TO39 » Sat Apr 27, 2013 11:00 am

Didn't most of the developed countries have an increase in debt the last decade? Surely this must have helped the rise in gold. Thats a lot of people who have access to gold through ETFs and other means who are worried about the various debt limts. This would raise the price even in those countries who aren't raising their debt levels due to it being a global economy.

Thats the way I see it
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Re: My Take on Gold

Postby mtbouchard » Sat Apr 27, 2013 11:01 am

I said this here in 2009 and still believe it:
----------------------------------------------------------------------------
Postby mtbouchard » Wed Nov 18, 2009 12:40 am
To me gold having a small amount of gold can help protect from US Dollar risk. But so can foreign currencies, debt or equities. Tips are a much better hedge to inflation and if you do not plan to leave the US, a decline in the dollar would just manifest itself in inflation anyway.

And unfortunately, gold is prone to speculation - just as a year ago "black gold" was as well. There is a feeling that just because there is a limited amount of something its price cannot go down - whether it be real estate in japan, gold, or oil. There are millions of tons of gold in the ocean - theres just not a cheap way to extract it - YET! :)

Gold is really like buying a foreign currency to a country that is guarenteed to have no inflation or interest and therefore maintains price-parity from year to year. I call it goldland. But these days everyone wants to live there even though theyve never even visited!
--------------------------------------------------------------------------------
As it turns out, I have a 1% of Asset Allocation in inverse Gold ETFs and am up 20%. Never bet against what the bond markets are saying (no inflation for 10 years).

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Re: My Take on Gold

Postby TO39 » Sat Apr 27, 2013 11:04 am

Epsilon Delta wrote:My chemistry class once toured an Engelhard Industries refinery. We got to pass around a 50 pound gold ingot. It is indeed impressive, even if you didn't know it was worth $150,000. It wasn't shiny however, more of a matte yellow.



When was a 50 lb gold ingot worth 150K? not this century I would guess
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Re: My Take on Gold

Postby Joe S. » Sat Apr 27, 2013 11:25 am

TO39 wrote:
Epsilon Delta wrote:My chemistry class once toured an Engelhard Industries refinery. We got to pass around a 50 pound gold ingot. It is indeed impressive, even if you didn't know it was worth $150,000. It wasn't shiny however, more of a matte yellow.

When was a 50 lb gold ingot worth 150K? not this century I would guess

By my math, 50 lbs is 600 troy ounces. That would make gold about $250/oz. His chemistry class probably did their tour around 1979. So it wasn't this century, but the previous century.

However it got close to $250 back in 2000, so he might be rounding off and referring to 2000.
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Re: My Take on Gold

Postby Joe S. » Sat Apr 27, 2013 11:55 am

TO39 wrote:
Epsilon Delta wrote:
TO39 wrote: Here is a link to an article supportive of owning gold.
http://seekingalpha.com/article/1375731 ... s-analysis
I especially liked the chart US Debt and Debt limit Vs Gold.

A classic on how to lie with statistics. The graph does a number of things to overstate the case. If you don't torture the data it still says that both the debt and the price of gold increased from 2000 to 2011, but that's not enough for the author.

so where was the lie? I missed it. To me it looked like as the debt limit was raised, debt followed, and so did the price of gold..


If you look at a chart of gold back to 1975, you can see that gold may have corrected well with U.S. debt from 2000-2011, but it didn't correlate very well before. The chart maker deliberately tailored his analysis to fit a short span of years.
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Re: My Take on Gold

Postby Epsilon Delta » Sat Apr 27, 2013 1:09 pm

Joe S. wrote:If you look at a chart of gold back to 1975, you can see that gold may have corrected well with U.S. debt from 2000-2011, but it didn't correlate very well before. The chart maker deliberately tailored his analysis to fit a short span of years.

Exactly, and when the article was written, in April 2013 there are also an addition year and half of date on the right hand side that don't support the case. He also fudged the y-axis, but that's only a venal sin.
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Re: My Take on Gold

Postby Rick Ferri » Sat Apr 27, 2013 1:55 pm

mtbouchard wrote:I said this here in 2009 and still believe it:
----------------------------------------------------------------------------
Postby mtbouchard » Wed Nov 18, 2009 12:40 am
To me gold having a small amount of gold can help protect from US Dollar risk. But so can foreign currencies, debt or equities. Tips are a much better hedge to inflation and if you do not plan to leave the US, a decline in the dollar would just manifest itself in inflation anyway.
Matt Bouchard


I've already said this, but I' repeat. A what level can it help protect your portfolio?

The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."

At any price gold protects your portfolio? That's not good logic.

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Re: My Take on Gold

Postby rmelvey » Sat Apr 27, 2013 2:11 pm

Rick Ferri wrote:
I've already said this, but I' repeat. A what level can it help protect your portfolio?

The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."

At any price gold protects your portfolio? That's not good logic.

Rick Ferri


That same logic permeates most boglehead portfolios as well. Isn't the most common advice to draft a reasonable asset allocation, rebalance, and stay the course? Do you suggest that investors attempt to market time stock and bond markets based off of valuation as well?
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Re: My Take on Gold

Postby dbr » Sat Apr 27, 2013 2:19 pm

rmelvey wrote:
Rick Ferri wrote:
I've already said this, but I' repeat. A what level can it help protect your portfolio?

The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."

At any price gold protects your portfolio? That's not good logic.

Rick Ferri


That same logic permeates most boglehead portfolios as well. Isn't the most common advice to draft a reasonable asset allocation, rebalance, and stay the course? Do you suggest that investors attempt to market time stock and bond markets based off of valuation as well?


A person with x% in gold in 2002 would have sold an awful lot of it between then and now.
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Re: My Take on Gold

Postby Rick Ferri » Sat Apr 27, 2013 5:27 pm

rmelvey wrote:
Rick Ferri wrote:
I've already said this, but I' repeat. A what level can it help protect your portfolio?

The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."

At any price gold protects your portfolio? That's not good logic.

Rick Ferri


That same logic permeates most boglehead portfolios as well. Isn't the most common advice to draft a reasonable asset allocation, rebalance, and stay the course? Do you suggest that investors attempt to market time stock and bond markets based off of valuation as well?


The mechanics of portfolio management are buy, hold and rebalance, but this all starts with what to buy. When you buy hard assets like gold, you have to make room in your portfolio by reducing your investment in income and growth producing assets. That's call opportunity cost. Since gold does not pay interest or dividends and does not grow over time (one ounce doesn't expand into two ounces), then the only thing going for gold is the hope that it will be negative correlated with stocks and bonds in a bear market, and rebalancing will produce a big enough payday so that it make ups for the lack of growth and income. During the wait, you'll have to pay fees to own gold. It's a big bet that tends to work about 5 years out of every 25.

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Re: My Take on Gold

Postby Clive » Sun Apr 28, 2013 4:42 am

Clearly_Irrational wrote:
btenny wrote:I hold a bunch of oil companies all with huge oil reserves instead of gold for a portion of my portfolio. Everything I read and study on portfolio construction all comes back to some sort of inflation hedge and protection against currency manipulation that does not correlate well with regular stocks. Some people own commodities for this same reason. Others hold gold. I own oil. It has worked great for 20 plus years....

Bill

Except you don't own oil, you own shares of a company that works with oil, not the same thing at all. Additionally, oil is pro-cyclical which kind of kills the whole point.

XOM have something like 25-30 billion barrels of known oil reserves. At $100/barrel that's 10x their market cap. Assuming extraction and other costs amount to 90% (wild guess) and holding XOM is perhaps a bit like holding stock gain/loss + commodity gain/loss exposure rolled up into one. Similar somewhat to how you might hold either stocks + foreign currency separately, or perhaps foreign currency denominated stocks via a single entity.
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Re: My Take on Gold

Postby Clearly_Irrational » Sun Apr 28, 2013 12:30 pm

Clive wrote:XOM have something like 25-30 billion barrels of known oil reserves.


Oil reserves are not the same thing as oil that has already been extracted, but hey you don't have to take my word for it. The three year correlation between XOM and OIL is 0.59 so the price of OIL only explains about 34.8% of the price of XOM. The three year correlation between XOM and SPY is 0.84 so the stock market explains roughly 70.6% of the price of XOM. To my mind this is an ineffective play on oil prices.
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Re: My Take on Gold

Postby dbr » Sun Apr 28, 2013 12:33 pm

Clearly_Irrational wrote:
Clive wrote:XOM have something like 25-30 billion barrels of known oil reserves.


Oil reserves are not the same thing as oil that has already been extracted, but hey you don't have to take my word for it. The three year correlation between XOM and OIL is 0.59 so the price of OIL only explains about 34.8% of the price of XOM. The three year correlation between XOM and SPY is 0.84 so the stock market explains roughly 70.6% of the price of XOM. To my mind this is an ineffective play on oil prices.



But, but, but . . . that is clearly rational, so something does not add up here.
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Re: My Take on Gold

Postby Clive » Sun Apr 28, 2013 2:48 pm

Clearly_Irrational wrote:The three year correlation between XOM and OIL is 0.59 so the price of OIL only explains about 34.8% of the price of XOM. The three year correlation between XOM and SPY is 0.84 so the stock market explains roughly 70.6% of the price of XOM.

Using your figures and some pretty broad generalisations, a 35% allocation to XOM might be considered as being 25% (rounding) stock-like (35 x 0.706 = 24.7%) and 12% (35 x 0.348 = 12.2%) commodity-like exposure.

IYE ETF might be considered as an alternative to XOM (easier to use IYE than XOM as etfreplay has data for IYE but not XOM).

The 4x25 Permanent Portfolio holds 25% in each of stocks, gold, STT and LTT and rebalances at 35% upper, 15% lower rebalance bands.

A STT/LTT barbell is broadly similar to holding a 5 year treasury fund (VFITX)

So 25% stock, 12% commodity, rest (63%) in VFITX - synthesised using 35% IYE, 65% VFITX is broadly similar to a Permanent Portfolio, but somewhat light on the commodity front (12% instead of 25%). 2000 to 2009 total gains when using PRPFX as a proxy for PERM :

Image

reasonably closely tracked each other with similar overall volatility. Post 2009 with gold having performed relatively strongly that tracking has drifted somewhat. If however we top up the commodity side by adding 13% gold to uplift commodity exposure to 25% levels then :

Image

I appreciate this is some pretty wild generalisation/assumptions, but broadly it seems to fit reasonably well.

Returning to what Bill said :

btenny wrote:I hold a bunch of oil companies all with huge oil reserves instead of gold for a portion of my portfolio. Everything I read and study on portfolio construction all comes back to some sort of inflation hedge and protection against currency manipulation that does not correlate well with regular stocks. Some people own commodities for this same reason. Others hold gold. I own oil. It has worked great for 20 plus years....

that appears to be quite reasonable IMO.

Out of interest, how did you estimate/calculate your 34.8% and 70.6% figures for : (correlation between XOM and OIL is 0.59 so the price of OIL only explains about 34.8% of the price of XOM. The three year correlation between XOM and SPY is 0.84 so the stock market explains roughly 70.6% of the price of XOM ?

PS

Extending that concept further, for all of the limited historic data so far available, 12% 3x IYE (ERX) for 36% IYE like exposure, 4% 3x GLD (UGLD) for 12% gold like exposure, rest (84%) VFITX has compared reasonably closely with PRPFX over the last 18 months (excepting the last month or two - perhaps due to weightings having drifted and in need of being rebalanced).

Image

I appreciate this is all much more artful than scientific, but the pictures painted do look broadly similar?
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Re: My Take on Gold

Postby Clearly_Irrational » Sun Apr 28, 2013 3:26 pm

Clive wrote:Out of interest, how did you estimate/calculate your 34.8% and 70.6% figures


R^2 = Pearson * Pearson

You can't use both numbers though, they're separate comparisons of how well the model fits.
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Re: My Take on Gold

Postby TO39 » Sun Apr 28, 2013 5:30 pm

The 4x25 Permanent Portfolio holds 25% in each of stocks, gold, STT and LTT and rebalances at 35% upper, 15% lower rebalance bands.


Is this true? ,I thought it was rebalence at 21% lower and 29% higher 16% of 25 is 4.
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Re: My Take on Gold

Postby TO39 » Sun Apr 28, 2013 5:39 pm

Rick Ferri said: The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."

At any price gold protects your portfolio? That's not good logic.

Didn't he make the same case (don't own gold) at $500 that he is making at $1400?

I realize the reasoning behind his argument is no long term return from owning gold (whether at $500 or $1400)

I see it being logical to own a percentage of gold in your portfolio at both $500 and $1500 for protection. I also see the case being stronger at $500, but we really can't see the future.
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Re: My Take on Gold

Postby Clive » Sun Apr 28, 2013 5:52 pm

Clearly_Irrational wrote:R^2 = Pearson * Pearson

Thanks

TO39 wrote:The 4x25 Permanent Portfolio holds 25% in each of stocks, gold, STT and LTT and rebalances at 35% upper, 15% lower rebalance bands.

Is this true? I thought it was rebalance at 21% lower and 29% higher 16% of 25 is 4.

As I understand it, its 40% rebalance bands. If any one asset declines to/below 25% x 0.6 = 15% lower weighting; or rises to/above 25% x 1.4 = 35% upper weighting, reset all four back to 25% equal weightings.
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Re: My Take on Gold

Postby Clive » Sun Apr 28, 2013 7:57 pm

Clearly_Irrational wrote:R^2 = Pearson * Pearson

You can't use both numbers though, they're separate comparisons of how well the model fits.

Doesn't that depend upon context?

There's no necessity for it to be contained to 100% or less for the combined total.

If as a Brit I hold US $ then I have USD/GBP FX risk/reward exposure. If instead of just holding US $ currency alone I buy US stocks with that currency I have 100% currency + 100% stock risk/reward exposure.

10% ERX (3x energy ETF) has 30% IYE (1x) like stock exposure, which might break down to 21% stock (70%), 10.5% commodity (35%), 10% USD/GBP, 20% debt (leverage) risk/reward factors (combined exposure of 61.5% to a diverse range of risks/potential rewards). Instead of buying into each of those risks individually, the same degree of exposure is achieved via less actual funds being invested (each unit of investment in effect working harder/being leveraged). Somewhat similar to comparing buying a stock with 0% debt to equity to that of another stock that had 100% debt to equity.

Most, if not all assets when risk-levelled broadly have similar rewards. Its the degree of 'leverage' (overlap) and how those factors correlate (combined with rebalancing) that depicts overall total rewards. Not to use both numbers would seem to be wrong?
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Re: My Take on Gold

Postby technovelist » Thu May 02, 2013 6:03 pm

It's great to see so much gold bashing on a forum devoted to investment analysis! That means we aren't anywhere near being in a gold bubble.

When most people here start talking about how holding 25% in gold is a reasonable approach to diversification, then I'll start worrying about the possibility of a gold bubble...
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Re: My Take on Gold

Postby Rick Ferri » Thu May 02, 2013 9:49 pm

It's great to see so much gold bashing on a forum devoted to investment analysis! That means we aren't anywhere near being in a gold bubble.


You right. The last bubble popped in 2011 when gold hit $1,920. It's down 23% from the bubble peak and still falling down to it's inflation adjusted price of between $500-$600. There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble!

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Re: My Take on Gold

Postby plnelson » Sat May 04, 2013 6:51 pm

mtbouchard wrote:
Gold is really like buying a foreign currency to a country that is guarenteed to have no inflation or interest and therefore maintains price-parity from year to year. I call it goldland.

Matt Bouchard


No it isn't. Why do you say that? The price of gold in actual purchasing power parity terms jumps all over the place.
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Re: My Take on Gold

Postby plnelson » Sat May 04, 2013 6:55 pm

technovelist wrote:It's great to see so much gold bashing on a forum devoted to investment analysis! That means we aren't anywhere near being in a gold bubble.


Why do you say that? We were bashing it just as much when it was $1920/oz. Are you saying that wasn't a bubble?
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Re: My Take on Gold

Postby AndrewJackson » Sat May 04, 2013 7:05 pm

The benefit to Gold is that it is one of the very few forms of private wealth. [Suggestion to bypass the law removed by admin LadyGeek] This may seem unlikely, but it has happened in the past and could happen again in the future.
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Re: My Take on Gold

Postby LadyGeek » Sat May 04, 2013 8:10 pm

As a reminder, discussions of bypassing the law are totally unacceptable here.
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Re: My Take on Gold

Postby nisiprius » Sat May 04, 2013 8:36 pm

plnelson wrote:
mtbouchard wrote:Gold is really like buying a foreign currency to a country that is guarenteed to have no inflation or interest and therefore maintains price-parity from year to year. I call it goldland. Matt Bouchard
No it isn't. Why do you say that? The price of gold in actual purchasing power parity terms jumps all over the place.
For example:
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  • Dollars weren't a stable store of value when dollars were on the gold standard.
  • Gold wasn't a stable store of value when we were on the gold standard.
  • Gold hasn't been a stable store of value since we went off the gold standard.
That's just simple fact, whether it matches anyone's theory or not.
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Re: My Take on Gold

Postby camaro327 » Sun May 05, 2013 6:36 am

Rick Ferri wrote:The price has already tripled and there hasn't been inflation or US dollar risk. Yet people are making the same argument about owning gold at $1400 per ounce they did at $500 per ounce. "Gold protects my portfolio."


I don't hear much about the fact that the GLD started trading November 18, 2004 and how this has impacted the gold market. I don't think its coincidence that gold has had out-sized returns since then. Clever marketing is part of the power behind the gold bull market, which included the introduction of gold exchange traded funds.
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Re: My Take on Gold

Postby wshang » Sun May 05, 2013 10:28 am

Rick Ferri wrote:It's down 23% from the bubble peak and still falling down to it's inflation adjusted price of between $500-$600. There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble!
Rick Ferri

Hmmm, this sounds like chartist talk if not market timing. Guess that is considered okay when talking about things other than index funds on this forum.
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Re: My Take on Gold

Postby Norris » Sun May 05, 2013 12:39 pm

Clearly_Irrational wrote:Gold is basically an insurance asset. We don't normally expect insurance to make us money, instead it's role is to help us avoid catastrophic losses. There is a price associated with that function, whether or not you consider that price affordable depends on your situation.


I think this is a rational assessment even though authored by a Clearly_Irrational Boglehead :happy As regards Warren Buffett and his negative comments on owning gold, it's interesting that he offers a different type of insurance. The future is not ours to see so who can really say? Other than death and taxes, there are no guarantees in this life so if owning gold makes you feel better about an uncertain future, then why not? I will agree that gold has been and continues to be relatively expensive (IMHO).

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Re: My Take on Gold

Postby Rick Ferri » Sun May 05, 2013 12:46 pm

wshang wrote:
Rick Ferri wrote:It's down 23% from the bubble peak and still falling down to it's inflation adjusted price of between $500-$600. There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble!
Rick Ferri

Hmmm, this sounds like chartist talk if not market timing. Guess that is considered okay when talking about things other than index funds on this forum.


I don't own gold and I'm not selling is short, so I'm not market timing. This is my opinion. I'll give my opinion on market valuation. Those who have followed me on this forum for years know this. It doesn't change the we should invest, though.

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Re: My Take on Gold

Postby umfundi » Sun May 05, 2013 12:53 pm

wshang wrote:
Rick Ferri wrote:It's down 23% from the bubble peak and still falling down to it's inflation adjusted price of between $500-$600. There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble!
Rick Ferri

Hmmm, this sounds like chartist talk if not market timing. Guess that is considered okay when talking about things other than index funds on this forum.

+1
Even though I get pummeled every time I make a snide remark about reversion to the mean and momentum as predictors, I will persist!

Not criticizing Rick, though. Since there is no rational way to assess the true value of gold (what is its P/E?), you might as well read the tea leaves.

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Re: My Take on Gold

Postby Rick Ferri » Thu Jun 27, 2013 10:43 pm

Gold fell below $1,200 today, down from $1,900. Only $600 more to go and it will be at fair value!

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Re: My Take on Gold

Postby momar » Fri Jun 28, 2013 1:54 am

nisiprius wrote:
plnelson wrote:
mtbouchard wrote:Gold is really like buying a foreign currency to a country that is guarenteed to have no inflation or interest and therefore maintains price-parity from year to year. I call it goldland. Matt Bouchard
No it isn't. Why do you say that? The price of gold in actual purchasing power parity terms jumps all over the place.
For example:
Image
  • Dollars weren't a stable store of value when dollars were on the gold standard.
  • Gold wasn't a stable store of value when we were on the gold standard.
  • Gold hasn't been a stable store of value since we went off the gold standard.
That's just simple fact, whether it matches anyone's theory or not.

Hooey. What does that graph look like when the y-axis is # of bespoke suits?
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Re: My Take on Gold

Postby LondonJimmy » Fri Jun 28, 2013 5:41 am

Rick, shouldn't gold be compared to paper currency? I don't think gold should be compared to stocks. Gold was traditionally money and as such, it should be compared to your currency. Since the Fed was established hasn't paper money lost around 99% of its value, whereas gold maintains value over a long period of time. Granted, it can stay down in dollar terms for a long amount of time, and you can earn interest on paper money (although not much over the last few years) but comparing gold to stocks is not correct in my opinion.

Therefore if we ignore speculation, a small amount of gold (say 5% of ones portfolio) could be held for diversification benefits.
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Re: My Take on Gold

Postby Clive » Fri Jun 28, 2013 5:57 am

If stocks are like an undated variable coupon bond, then gold is at the other end of the scale (undated zero coupon inflation bond).

A barbell of the two appears to provide TIPS like characteristics - except being more volatile.

Image

In some countries TIPS have the inflationary uplift element taxed. A blend of stocks and gold in contrast can be more tax efficient.

Correctly predict where you think both stocks and undated TIPS might be heading - and you might be able to deduce where the price of gold might be heading. Or equally predict gold and TIPS and deduce stocks.

My gut feel at present is that investors are more inclined to move out of safe relatively expensive TIPS and into stocks where the risks are perceived as being in decline compared to 2008/9 type circumstances. That's JMO - but if correct then potentially that's a case of continued TIPS and gold in decline, stocks in ascension. But of course that could turn around in an instant.

There won't be another bubble like the one we've just seen for 20 years. We aren't anywhere near the next gold bubble!
Rick Ferri

I wouldn't be so sure. UK 1976 and the GBP had to be bailed out by the IMF. Gold soared. 1979 through early 1980's and there was a global crisis of high inflation during which time again gold soared. A handful of years between consecutive crises (for UK investors).

Whilst post early 1980's up to 2000 there was mostly stability, growth, declining inflation etc. - that's just circumstantial. The intervals between crises is unpredictable.
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Re: My Take on Gold

Postby Epsilon Delta » Fri Jun 28, 2013 11:03 am

momar wrote:Hooey. What does that graph look like when the y-axis is # of bespoke suits?

Fuzzy, very fuzzy. As is the concept of a bespoke suit. Anyone priced a toga recently?
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Re: My Take on Gold

Postby Clearly_Irrational » Fri Jun 28, 2013 11:21 am

Epsilon Delta wrote:Anyone priced a toga recently?


Google shopping says about $30 or 0.025 ounces at the current spot price.
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Re: My Take on Gold

Postby dnaumov » Fri Jun 28, 2013 1:20 pm

How on earth are you people giving gold a "fair value" of 600$ when marginal production costs are above 1200$?
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Re: My Take on Gold

Postby momar » Fri Jun 28, 2013 1:28 pm

dnaumov wrote:How on earth are you people giving gold a "fair value" of 600$ when marginal production costs are above 1200$?

What fraction of the world gold supply is produced each year? Does gold mined hundred or thousands of years ago degrade?
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Re: My Take on Gold

Postby dnaumov » Fri Jun 28, 2013 1:35 pm

momar wrote:
dnaumov wrote:How on earth are you people giving gold a "fair value" of 600$ when marginal production costs are above 1200$?

What fraction of the world gold supply is produced each year? Does gold mined hundred or thousands of years ago degrade?

Demand for physical is not exactly drying up, quite the contrary.
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Re: My Take on Gold

Postby umfundi » Fri Jun 28, 2013 1:36 pm

dnaumov wrote:How on earth are you people giving gold a "fair value" of 600$ when marginal production costs are above 1200$?

Yes, an article on Yahoo says that the cost of production at many mines is $1000 - $1200 per ounce.

But gold is a curious thing. Its price is not driven by supply and demand. Rather, supply is driven by the price. If the price drops, the more expensive producers stop mining. So, the supply and the cost of production go down.

In my opinion, no one knows what drives the price of gold.

Keith
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Re: My Take on Gold

Postby ps56k » Fri Jun 28, 2013 3:17 pm

Have been wondering the same thing - why have gold - in this current state of the economy ?
With that said,
I do hold some of both the PRPFX Perm Portfolio,
the GLD ETF,
and a few of the 1oz gold and 1oz silver American Eagles.
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Re: My Take on Gold

Postby Rick Ferri » Fri Jun 28, 2013 4:34 pm

umfundi wrote:
dnaumov wrote:How on earth are you people giving gold a "fair value" of 600$ when marginal production costs are above 1200$?

Yes, an article on Yahoo says that the cost of production at many mines is $1000 - $1200 per ounce.

Keith


It's a mistake to assume that the price of gold cannot drop below the cost of production. This happens in the metals markets quite often. BTW, I read elsewhere that inefficient miners cost of production is $900 per ounce and that efficient miners are still producing an ounce of gold below $700 per ounce.

Rick Ferri
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