Dink2018 wrote: ↑
Sat Oct 19, 2019 10:22 am
Take a look at what a solid 5-15 slug of gold does to safe withdrawal rates.
I did. It's not pretty. There are better options. You might as well hold a small amount of bitcoin or other uncorrelated assets. Why not buy a commodities ETF. Surely a diversified basket of commodities is better than one?
It might come as no surprise that commodities are also almost universally hated.
I'm not talking about holding gold in isolation, but holding a specific percentage in a portfolio.
That's exactly the use case I'm talking about.
Doesn't protect against hyper inflation? Yes it does for sure. Look at Argentina, or some African countries, you'd be nuts to hold bonds there vs gold. Show me a currency that hyper inflated vs gold and then ask yourself which one you'd rather hold?
You're moving the goalposts. The question isn't whether I would rather hold gold instead of bonds. The question is whether an allocation to gold improves your overall portfolio.
The only reason why I would want to hold gold in Argentina is to bribe the border guards. If I wanted something to protect against hyperinflation, I would buy stocks, foreign bonds or income producing hard assets such as farmland. Farmland, like gold, has an expected return of zero. But in addition to the appreciation of the land, you can produce crops on it to produce income.
I think people who don't consider holding at LEAST 5% gold are guilty of recency bias. The entire planet has only been off the standard since the 70's that's a minor blip.
That's funny, because that's exactly how I think about people that recommend gold. If you look at recent history, you see an asset with positive returns that is a good addition to your portfolio. But if you use long-term numbers, gold does not have positive expected returns and a portfolio that includes gold is not efficient (according to my calculations). An excellent case study of survivorship bias.
If you believe that gold has a positive real return, you can use it as a diversifier in your portfolio. But if you look at very long timescales, gold does not have statistically significant positive expected returns.