PSA: gold

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
NoRegret
Posts: 324
Joined: Sat Dec 16, 2017 2:00 am
Location: California

PSA: gold

Post by NoRegret »

Speaking as someone with a sizable allocation to PMs I’m seeing a lot of pro-gold posts lately. Note it won’t be out of character for gold to pull back from its old high. FWIW I trimmed my miner positions this week and plan to do so again early next.

Don’t be one of those who buy at $1900 and sell at $1750. Consider DCA over 5-6 weeks If you really want to buy.

NR
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
All Seasons
Posts: 226
Joined: Sun Dec 10, 2017 4:14 pm

Re: PSA: gold

Post by All Seasons »

NoRegret wrote: Sat Jul 25, 2020 1:33 pm Speaking as someone with a sizable allocation to PMs I’m seeing a lot of pro-gold posts lately. Note it won’t be out of character for gold to pull back from its old high. FWIW I trimmed my miner positions this week and plan to do so again early next.

Don’t be one of those who buy at $1900 and sell at $1750. Consider DCA over 5-6 weeks If you really want to buy.

NR
I wouldn't worry about this crowd becoming pro-gold any time soon. :mrgreen:
User avatar
zaboomafoozarg
Posts: 2265
Joined: Sun Jun 12, 2011 12:34 pm

Re: PSA: gold

Post by zaboomafoozarg »

I usually pay way, way more than spot for gold

but the only kind I care about is in the form of ancient coins :D
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.

Source:
https://www.cnbc.com/2019/01/11/cramer- ... tocks.html

That was a pretty sweet call on Cramer's part to buy some gold, amiright? Booyah!
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
finite_difference
Posts: 2718
Joined: Thu Jul 09, 2015 7:00 pm

Re: PSA: gold

Post by finite_difference »

Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.

Source:
https://www.cnbc.com/2019/01/11/cramer- ... tocks.html

That was a pretty sweet call on Cramer's part to buy some gold, amiright? Booyah!
Or vice-versa, if gold was expensive at $1,300, then it is really expensive at $1,900.

The higher the price goes, the more mines will open up, increasing supply and dampening prices. In the short term, if you think the current pandemic is going to get worse, then I could see the price of gold rising. If it gets better, then I would expect it to decrease (enables more supply and triggers less flight to safety.) You could probably make arguments going the other way.

I can see 5% gold but not more than that, and timing it seems no easier than timing stocks or bonds.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Rat_Race
Posts: 71
Joined: Sun Jan 13, 2008 10:02 pm

Re: PSA: gold

Post by Rat_Race »

I found Peter's latest video pretty informative about the history of "money". He even explains the reason for those ridges on the edge of quarters and dimes, which no longer have any purpose. He's always been a gold bug and permabear, but if you set that aside, he actually makes a lot of sense from a constitutional money perspective. It's pretty alarming what has happened to the dollar since we wen't off the gold standard:

https://www.youtube.com/watch?v=dF97JGYCBRM

I own a little gold and silver purchased prior to the GFC, but I don't get involved with metals stocks at all.
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

finite_difference wrote: Sat Jul 25, 2020 2:13 pm The higher the price goes, the more mines will open up, increasing supply and dampening prices.
I wonder how much gold production would increase even if the industry went full steam ahead. Would it indeed be enough to significantly sway the price of gold? The industry does have an estimate of how much gold there is left to mine...how much is this figure "priced in" to the price of gold? These are rhetorical questions, I don't expect you to be our in-house gold mining expert.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
User avatar
Anon9001
Posts: 1546
Joined: Fri Dec 20, 2019 9:28 am
Location: भारत

Re: PSA: gold

Post by Anon9001 »

The price of Gold depends on how high the risk free rate is. Right now the risk free rate is now 0-negative percent in many developed countries and the price is reflecting that. Gold has a cost to holding in it in that it offers no yield but no yield is certainly better than negative yielding bonds.
Land/Real Estate:89.4% Equities:7.6% Fixed Income:1.7% Gold:0.8% Cryptocurrency:0.5%
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

Anon9001 wrote: Sun Jul 26, 2020 9:32 am The price of Gold depends on how high the risk free rate is. Right now the risk free rate is now 0-negative percent in many developed countries and the price is reflecting that. Gold has a cost to holding in it in that it offers no yield but no yield is certainly better than negative yielding bonds.
If the U.S. slides into negative-yield-land, this may increase the price of gold. Alternatively, because people buy gold as an inflation hedge, would gold rally if inflation rears its ugly head? If inflation did miraculously appear (in this deflationary environment that seems as unlikely as Scarlett Johansson dropping by my house for tea) would not inflation need to bubble up beyond the Fed's ability to control it in order for gold prices to rally?
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
User avatar
fredflinstone
Posts: 2817
Joined: Mon Mar 29, 2010 7:35 am
Location: Bedrock

Re: PSA: gold

Post by fredflinstone »

Gold prices have been rising, in my opinion, for the following reasons:

- rising government spending
- rising government debt
- declining real interest rates
- rising expectations of future wealth/estate taxes (which unscrupulous people may evade illegally using physical bullion)
- civil disturbances and political instability in the US
- rising international tension in the Middle East

There is no way to know what the future holds. There was a significant pullback in March and there will be another one at some point. I am very glad to own gold as part of my portfolio and will continue to do so. If things really hit the fan, I am optimistic that my portfolio will hold up better than a stock/bond portfolio.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
User avatar
fredflinstone
Posts: 2817
Joined: Mon Mar 29, 2010 7:35 am
Location: Bedrock

Re: PSA: gold

Post by fredflinstone »

Robot Monster wrote: Sun Jul 26, 2020 9:48 am
Anon9001 wrote: Sun Jul 26, 2020 9:32 am The price of Gold depends on how high the risk free rate is. Right now the risk free rate is now 0-negative percent in many developed countries and the price is reflecting that. Gold has a cost to holding in it in that it offers no yield but no yield is certainly better than negative yielding bonds.
If the U.S. slides into negative-yield-land, this may increase the price of gold. Alternatively, because people buy gold as an inflation hedge, would gold rally if inflation rears its ugly head? If inflation did miraculously appear (in this deflationary environment that seems as unlikely as Scarlett Johansson dropping by my house for tea) would not inflation need to bubble up beyond the Fed's ability to control it in order for gold prices to rally?
Yes, negative interest rates should increase the demand for (and hence price of) gold. And inflation (or more accurately an increase in inflationary expectations) also would increase the price of gold. I agree that deflation is more likely than inflation, but one never knows. For example, year-over-year housing prices are up sharply in my neighborhood this summer despite the high unemployment rate. It is strange.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
User avatar
arcticpineapplecorp.
Posts: 8567
Joined: Tue Mar 06, 2012 9:22 pm

Re: PSA: gold

Post by arcticpineapplecorp. »

chasing after something after it's already moved.

remind you of anything?

Image
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

arcticpineapplecorp. wrote: Sun Jul 26, 2020 12:03 pm chasing after something after it's already moved.
There's simply no telling if it will move more.

"Bank of America raises gold forecast by a whopping $1,000 to $3,000 because of zero rates"
https://www.cnbc.com/2020/04/21/bank-of ... rates.html

Maybe this is right, maybe this is wrong, there's simply no telling.

If interest rates go negative, or we get expectations for high inflation, the theory is, gold prices will rally, but there's no way to prove this barring seeing how it actually plays out.

How is this actionable? Ask the cat.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
TheNightsToCome
Posts: 772
Joined: Fri Jun 30, 2017 11:48 pm

Re: PSA: gold

Post by TheNightsToCome »

finite_difference wrote: Sat Jul 25, 2020 2:13 pm
Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.

Source:
https://www.cnbc.com/2019/01/11/cramer- ... tocks.html

That was a pretty sweet call on Cramer's part to buy some gold, amiright? Booyah!
Or vice-versa, if gold was expensive at $1,300, then it is really expensive at $1,900.

The higher the price goes, the more mines will open up, increasing supply and dampening prices. In the short term, if you think the current pandemic is going to get worse, then I could see the price of gold rising. If it gets better, then I would expect it to decrease (enables more supply and triggers less flight to safety.) You could probably make arguments going the other way.

I can see 5% gold but not more than that, and timing it seems no easier than timing stocks or bonds.
Gold skeptic Karsten at Early Retirement Now found that a 15% gold allocation increased the safe withdrawal rate in retirement. Excerpts:

"Just for full disclosure, except for a quarter-ounce Gold American Eagle coin I got from my late Uncle Karl I own no gold. So, with a little bit of confirmation bias, I set out to prove that gold has no place in a retirement portfolio. The average return over time is simply too low. But gold shines (pardon the pun) when all the other asset classes are hurting. And that’s a huge benefit! Not so much in the pre-1920s era but at least during the last 100 years and during some of the well-known bear markets and recessions.

I particularly like the fact that gold seems to work well both during inflationary recessions (1970s) but also during the bad demand shocks with that conjured up fears of a deflationary scenario (2008/9)."


and,

"Having decided that the ideal way would be to reduce the equity portion and replace it with a gold ETF, let’s see how much we should replace. Let’s reduce the equity allocation from 75% to 50% in 5% steps and add gold accordingly, going from 0% to 25% (while keeping the 25% bond allocation) and see how that changes our safe withdrawal stats:

You get the highest failsafe at 15% gold, i.e., 60/25/15 allocation so S/B/G. Beyond that, you start lowering your failsafe again."


https://earlyretirementnow.com/2020/01/ ... s-part-34/
TheNightsToCome
Posts: 772
Joined: Fri Jun 30, 2017 11:48 pm

Re: PSA: gold

Post by TheNightsToCome »

TheNightsToCome wrote: Sun Jul 26, 2020 12:28 pm
finite_difference wrote: Sat Jul 25, 2020 2:13 pm
Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.

Source:
https://www.cnbc.com/2019/01/11/cramer- ... tocks.html

That was a pretty sweet call on Cramer's part to buy some gold, amiright? Booyah!
Or vice-versa, if gold was expensive at $1,300, then it is really expensive at $1,900.

The higher the price goes, the more mines will open up, increasing supply and dampening prices. In the short term, if you think the current pandemic is going to get worse, then I could see the price of gold rising. If it gets better, then I would expect it to decrease (enables more supply and triggers less flight to safety.) You could probably make arguments going the other way.

I can see 5% gold but not more than that, and timing it seems no easier than timing stocks or bonds.
Gold skeptic Karsten at Early Retirement Now found that a 15% gold allocation increased the safe withdrawal rate in retirement. Excerpts:

"Just for full disclosure, except for a quarter-ounce Gold American Eagle coin I got from my late Uncle Karl I own no gold. So, with a little bit of confirmation bias, I set out to prove that gold has no place in a retirement portfolio. The average return over time is simply too low. But gold shines (pardon the pun) when all the other asset classes are hurting. And that’s a huge benefit! Not so much in the pre-1920s era but at least during the last 100 years and during some of the well-known bear markets and recessions.

I particularly like the fact that gold seems to work well both during inflationary recessions (1970s) but also during the bad demand shocks with that conjured up fears of a deflationary scenario (2008/9)."


and,

"Having decided that the ideal way would be to reduce the equity portion and replace it with a gold ETF, let’s see how much we should replace. Let’s reduce the equity allocation from 75% to 50% in 5% steps and add gold accordingly, going from 0% to 25% (while keeping the 25% bond allocation) and see how that changes our safe withdrawal stats:

You get the highest failsafe at 15% gold, i.e., 60/25/15 allocation so S/B/G. Beyond that, you start lowering your failsafe again."


https://earlyretirementnow.com/2020/01/ ... s-part-34/
Edit: I increased my allocation from 7.5% to 10% after reading this. It's higher now due to the run up in price, but still short of 15%.
texasdiver
Posts: 3681
Joined: Thu Jun 25, 2009 12:50 am
Location: Vancouver WA

Re: PSA: gold

Post by texasdiver »

Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.
You can say that about any stock or commodity.

There is nothing unique about gold that would make me kick myself if it doubles any more than I would kick myself if Apple or Tesla doubles in a year from now. I know there will be a bunch of stocks that will double between now and 2022. I don't know what ones they are. I don't worry about it.
000
Posts: 5172
Joined: Thu Jul 23, 2020 12:04 am

Re: PSA: gold

Post by 000 »

NoRegret wrote: Sat Jul 25, 2020 1:33 pm Speaking as someone with a sizable allocation to PMs I’m seeing a lot of pro-gold posts lately. Note it won’t be out of character for gold to pull back from its old high. FWIW I trimmed my miner positions this week and plan to do so again early next.

Don’t be one of those who buy at $1900 and sell at $1750. Consider DCA over 5-6 weeks If you really want to buy.

NR
Market timing is a profitable but difficult endeavor. The right time to buy Gold is when one decides it belongs in one's asset allocation. It's important to remember that USD is not a perfect measure of value; perhaps Gold is looking so "high" because of asset inflation in USD.
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

texasdiver wrote: Sun Jul 26, 2020 4:40 pm
Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.
You can say that about any stock or commodity.
Yes, I guess that's true.

Re-reading my post, I see Cramer said it wasn't the perfect time to buy gold, but when is it the perfect time to buy anything? Only in retrospect do we know.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
User avatar
market timer
Posts: 6470
Joined: Tue Aug 21, 2007 1:42 am

Re: PSA: gold

Post by market timer »

The formula I gave to value gold six months ago is holding up pretty well: P = 1800 * e ^ (-33 * r), where r is the 30-year real rate

Currently, r = -0.38%, so fair value is approximately $2040/oz. Back when gold was $1200 in November 2018, real yields were at 1.3%. The model predicted a fair value of $1172.

You can interpret this formula as saying gold is like an inflation-adjusted bond that pays you $1800 (inflation adjusted) after 33 years. You could tinker with the parameters ($1800, 33 years) to find the best fit, but at least the intuition seems reasonable.
bberris
Posts: 1762
Joined: Sun Feb 20, 2011 9:44 am

Re: PSA: gold

Post by bberris »

zaboomafoozarg wrote: Sat Jul 25, 2020 2:00 pm I usually pay way, way more than spot for gold

but the only kind I care about is in the form of ancient coins :D
Some of the Roman gold is gorgeous. I really like to look at them in museums but I could never bring myself to own any. Picture?
Nowizard
Posts: 3535
Joined: Tue Oct 23, 2007 5:33 pm

Re: PSA: gold

Post by Nowizard »

Executive order just signed last week to open what would be one of the world's largest gold mines in Alaska.

Tim
nigel_ht
Posts: 2761
Joined: Tue Jan 01, 2019 10:14 am

Re: PSA: gold

Post by nigel_ht »

Nowizard wrote: Mon Jul 27, 2020 8:45 am Executive order just signed last week to open what would be one of the world's largest gold mines in Alaska.

Tim
I dunno that I’d put money into infrastructure before November...
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

nigel_ht wrote: Mon Jul 27, 2020 8:52 am
Nowizard wrote: Mon Jul 27, 2020 8:45 am Executive order just signed last week to open what would be one of the world's largest gold mines in Alaska.

Tim
I dunno that I’d put money into infrastructure before November...
But aren't the odds of whatever is going to happen in the (non-discussable) political realm already priced in? Isn't it the very nature of stocks, this kind of uncertainty?
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
nigel_ht
Posts: 2761
Joined: Tue Jan 01, 2019 10:14 am

Re: PSA: gold

Post by nigel_ht »

Robot Monster wrote: Mon Jul 27, 2020 9:02 am
nigel_ht wrote: Mon Jul 27, 2020 8:52 am
Nowizard wrote: Mon Jul 27, 2020 8:45 am Executive order just signed last week to open what would be one of the world's largest gold mines in Alaska.

Tim
I dunno that I’d put money into infrastructure before November...
But aren't the odds of whatever is going to happen in the (non-discussable) political realm already priced in? Isn't it the very nature of stocks, this kind of uncertainty?
All I was commenting on was I personally wouldn't put a lot of CAPEX into digging physical holes in the ground before knowing whether that particular executive order would still be valid in 2021. Whether you could break even by 2025 is also an interesting question.
donaldfair71
Posts: 808
Joined: Wed Mar 06, 2013 4:15 pm

Re: PSA: gold

Post by donaldfair71 »

Yep. Agree with OP. Kind of run of the mill performance chasing, imo.
texasdiver
Posts: 3681
Joined: Thu Jun 25, 2009 12:50 am
Location: Vancouver WA

Re: PSA: gold

Post by texasdiver »

Nowizard wrote: Mon Jul 27, 2020 8:45 am Executive order just signed last week to open what would be one of the world's largest gold mines in Alaska.

Tim
No. There was no executive order. The Corps of Engineers just issued a final EIS on the Pebble mine that many believe was flawed. There is a long way to go and they still need various state permits and have to negotiate agreements with native groups to cross their lands. There is no done deal. And if environmental groups and fishing groups sue (which they will) then the entire analytical process used by the Trump administration will be subject to judicial review and possible reversal.

In other words, fishing groups can sue saying the analysis was flawed. A new administration can say "you know what, you are right, we made a mistake here" and a court can say "fine, do it over then" and the project is back dead in the water.
rich126
Posts: 2966
Joined: Thu Mar 01, 2018 4:56 pm

Re: PSA: gold

Post by rich126 »

fredflinstone wrote: Sun Jul 26, 2020 11:55 am Gold prices have been rising, in my opinion, for the following reasons:

- rising government spending
- rising government debt
- declining real interest rates
- rising expectations of future wealth/estate taxes (which unscrupulous people may evade illegally using physical bullion)
- civil disturbances and political instability in the US
- rising international tension in the Middle East

There is no way to know what the future holds. There was a significant pullback in March and there will be another one at some point. I am very glad to own gold as part of my portfolio and will continue to do so. If things really hit the fan, I am optimistic that my portfolio will hold up better than a stock/bond portfolio.
I largely agree. Although the political issues are largely world wide and not just in the US.

A correction is certainly possible (both in gold and in the stock market) but until the situation with the virus and US politics improve, I think gold makes a good investment. And sadly I don't see either situation improving any time soon.
KlangFool
Posts: 22115
Joined: Sat Oct 11, 2008 12:35 pm

Re: PSA: gold

Post by KlangFool »

finite_difference wrote: Sat Jul 25, 2020 2:13 pm
Robot Monster wrote: Sat Jul 25, 2020 2:04 pm In Jan 2019 when gold was $1,288, Jim Cramer said, "No, this is not the perfect time to buy gold, but I always advocate owning at least a little as insurance against the unknown.". To think that price at that time seemed meh makes me wonder if a year from now we might regard $1,900 as hella cheap. If gold goes to $3000 we might be kicking ourselves.

Source:
https://www.cnbc.com/2019/01/11/cramer- ... tocks.html

That was a pretty sweet call on Cramer's part to buy some gold, amiright? Booyah!
Or vice-versa, if gold was expensive at $1,300, then it is really expensive at $1,900.

The higher the price goes, the more mines will open up, increasing supply and dampening prices. In the short term, if you think the current pandemic is going to get worse, then I could see the price of gold rising. If it gets better, then I would expect it to decrease (enables more supply and triggers less flight to safety.) You could probably make arguments going the other way.

I can see 5% gold but not more than that, and timing it seems no easier than timing stocks or bonds.
finite_difference,

<<The higher the price goes, the more mines will open up, increasing supply and dampening prices. >>

I do not think the supply of the physical Gold and Silver can match the money printing speed of the Central Banks.

I am all for $500 to a few thousand in physical Gold or Silver.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

Speaking of Cramer...

"Gold is to me a sign there will be no vaccine," says @JimCramer. "The equity market is very hopeful that there will be a vaccine, but the gold market thinks that there won't be and the gold market thinks we'll be printing money forever."
https://twitter.com/SquawkCNBC/status/1 ... 65638?s=19

Is this actionable? Probably not. Do I feel the need to post it, anyway? Yes.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
smitcat
Posts: 8277
Joined: Mon Nov 07, 2016 10:51 am

Re: PSA: gold

Post by smitcat »

Robot Monster wrote: Mon Jul 27, 2020 12:45 pm Speaking of Cramer...

"Gold is to me a sign there will be no vaccine," says @JimCramer. "The equity market is very hopeful that there will be a vaccine, but the gold market thinks that there won't be and the gold market thinks we'll be printing money forever."
https://twitter.com/SquawkCNBC/status/1 ... 65638?s=19

Is this actionable? Probably not. Do I feel the need to post it, anyway? Yes.
I watch Cramer when I want entertainment and the WWF is not on.
User avatar
whodidntante
Posts: 10031
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: PSA: gold

Post by whodidntante »

market timer wrote: Sun Jul 26, 2020 11:21 pm The formula I gave to value gold six months ago is holding up pretty well: P = 1800 * e ^ (-33 * r), where r is the 30-year real rate

Currently, r = -0.38%, so fair value is approximately $2040/oz. Back when gold was $1200 in November 2018, real yields were at 1.3%. The model predicted a fair value of $1172.

You can interpret this formula as saying gold is like an inflation-adjusted bond that pays you $1800 (inflation adjusted) after 33 years. You could tinker with the parameters ($1800, 33 years) to find the best fit, but at least the intuition seems reasonable.
Is this based on original research?
Lock
Posts: 59
Joined: Sat Oct 05, 2019 8:52 pm

Re: PSA: gold

Post by Lock »

market timer wrote: Sun Jul 26, 2020 11:21 pm The formula I gave to value gold six months ago is holding up pretty well: P = 1800 * e ^ (-33 * r), where r is the 30-year real rate

Currently, r = -0.38%, so fair value is approximately $2040/oz. Back when gold was $1200 in November 2018, real yields were at 1.3%. The model predicted a fair value of $1172.

You can interpret this formula as saying gold is like an inflation-adjusted bond that pays you $1800 (inflation adjusted) after 33 years. You could tinker with the parameters ($1800, 33 years) to find the best fit, but at least the intuition seems reasonable.
Markettimer - out of curiosity - where did this equation come from?
Robot Monster
Posts: 2749
Joined: Sun May 05, 2019 11:23 am

Re: PSA: gold

Post by Robot Monster »

smitcat wrote: Mon Jul 27, 2020 12:48 pm
Robot Monster wrote: Mon Jul 27, 2020 12:45 pm Speaking of Cramer...

"Gold is to me a sign there will be no vaccine," says @JimCramer. "The equity market is very hopeful that there will be a vaccine, but the gold market thinks that there won't be and the gold market thinks we'll be printing money forever."
https://twitter.com/SquawkCNBC/status/1 ... 65638?s=19

Is this actionable? Probably not. Do I feel the need to post it, anyway? Yes.
I watch Cramer when I want entertainment and the WWF is not on.
Would be more entertaining if he had to compete against a random stock picking machine.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
GRP
Posts: 208
Joined: Wed Nov 22, 2017 5:35 pm

Re: PSA: gold

Post by GRP »

arcticpineapplecorp. wrote: Sun Jul 26, 2020 12:03 pm chasing after something after it's already moved.

remind you of anything?

The momentum factor suggests there's actually a large premium attached to doing that.
eer_no_evil
Posts: 74
Joined: Thu Jun 29, 2017 1:50 pm

Re: PSA: gold

Post by eer_no_evil »

So just curious, with the spike in prices, what’s the best company or avenue to resell gold scrap? Who’s giving closest to spot?

Thanks!
User avatar
Anon9001
Posts: 1546
Joined: Fri Dec 20, 2019 9:28 am
Location: भारत

Re: PSA: gold

Post by Anon9001 »

5% of anything other than Bitcoin is worthless. A 50% gain in Gold prices would move your portfolio by 2.5%. Are you really going to notice that difference? At least with Bitcoin you could argue that it is so volatile that even 5% would make you rich but Gold is not as volatile as Bitcoin.
Land/Real Estate:89.4% Equities:7.6% Fixed Income:1.7% Gold:0.8% Cryptocurrency:0.5%
000
Posts: 5172
Joined: Thu Jul 23, 2020 12:04 am

Re: PSA: gold

Post by 000 »

Anon9001 wrote: Mon Jul 27, 2020 1:55 pm 5% of anything other than Bitcoin is worthless. A 50% gain in Gold prices would move your portfolio by 2.5%. Are you really going to notice that difference? At least with Bitcoin you could argue that it is so volatile that even 5% would make you rich but Gold is not as volatile as Bitcoin.
If 5% is enough to meet your needs, than it is not worthless. Is 500,000 in cash not sufficient for decamillionaire?
User avatar
Anon9001
Posts: 1546
Joined: Fri Dec 20, 2019 9:28 am
Location: भारत

Re: PSA: gold

Post by Anon9001 »

000 wrote: Mon Jul 27, 2020 2:01 pm
Anon9001 wrote: Mon Jul 27, 2020 1:55 pm 5% of anything other than Bitcoin is worthless. A 50% gain in Gold prices would move your portfolio by 2.5%. Are you really going to notice that difference? At least with Bitcoin you could argue that it is so volatile that even 5% would make you rich but Gold is not as volatile as Bitcoin.
If 5% is enough to meet your needs, than it is not worthless. Is 500,000 in cash not sufficient for decamillionaire?
For most people it is not worth anything to have small exposure to Gold or alternatives. They will usually clutter their portfolio. I could see a case for 5% allocation to physical Gold though as it can maybe save you if hyperinflation occurs locally.
Land/Real Estate:89.4% Equities:7.6% Fixed Income:1.7% Gold:0.8% Cryptocurrency:0.5%
User avatar
arcticpineapplecorp.
Posts: 8567
Joined: Tue Mar 06, 2012 9:22 pm

Re: PSA: gold

Post by arcticpineapplecorp. »

GRP wrote: Mon Jul 27, 2020 1:03 pm
arcticpineapplecorp. wrote: Sun Jul 26, 2020 12:03 pm chasing after something after it's already moved.

remind you of anything?

The momentum factor suggests there's actually a large premium attached to doing that.
along with higher risk (standard deviation)...

Image

along with "periods of underperformance" (41% of the time, relative to "world" according to the chart below):

Image

source:
https://www.msci.com/documents/1296102/ ... 0323fc2957

not to mention, I think when factor fiends talk about momentum, I think they're talking about stocks generally, not gold.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
asif408
Posts: 2359
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: PSA: gold

Post by asif408 »

My PME position has gotten a little too big in recent weeks, so I did some rebalancing, and like OP I also noticed some pro-gold posts coming out recently. I hold a silver miners position that has gone up almost 200% since March, while nothing else I own is up even 50% since that time.

Tossed some of that into my international funds, which are seeing an overwhelming negative sentiment on this board, particularly in the last few months. We'll see how that plays out.
000
Posts: 5172
Joined: Thu Jul 23, 2020 12:04 am

Re: PSA: gold

Post by 000 »

asif408 wrote: Mon Jul 27, 2020 3:24 pm My PME position has gotten a little too big in recent weeks, so I did some rebalancing, and like OP I also noticed some pro-gold posts coming out recently. I hold a silver miners position that has gone up almost 200% since March, while nothing else I own is up even 50% since that time.
Rebalanced out of Gold today too.
asif408 wrote: Mon Jul 27, 2020 3:24 pm Tossed some of that into my international funds, which are seeing an overwhelming negative sentiment on this board, particularly in the last few months. We'll see how that plays out.
It's amazing how vocal the 100% US crowd has become here, even including prominent members.
asif408
Posts: 2359
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: PSA: gold

Post by asif408 »

000 wrote: Mon Jul 27, 2020 3:26 pm It's amazing how vocal the 100% US crowd has become here, even including prominent members.
It's as bad as I've seen it in my 6 years here.
nigel_ht
Posts: 2761
Joined: Tue Jan 01, 2019 10:14 am

Re: PSA: gold

Post by nigel_ht »

asif408 wrote: Mon Jul 27, 2020 3:31 pm
000 wrote: Mon Jul 27, 2020 3:26 pm It's amazing how vocal the 100% US crowd has become here, even including prominent members.
It's as bad as I've seen it in my 6 years here.
I moved more into international. hated to do it but it's a hedge as I move toward retirement. Same for gold. It's not there to make me rich. It's there to make sure I don't end up broke.
Last edited by nigel_ht on Tue Jun 22, 2021 8:46 am, edited 1 time in total.
oken
Posts: 199
Joined: Thu Oct 10, 2019 7:00 pm

Re: PSA: gold

Post by oken »

arcticpineapplecorp. wrote: Mon Jul 27, 2020 2:26 pm along with higher risk (standard deviation)...

Image

along with "periods of underperformance" (41% of the time, relative to "world" according to the chart below):

Image

source:
https://www.msci.com/documents/1296102/ ... 0323fc2957

not to mention, I think when factor fiends talk about momentum, I think they're talking about stocks generally, not gold.
Wait. So the volatility factor is a free lunch?
KlangFool
Posts: 22115
Joined: Sat Oct 11, 2008 12:35 pm

Re: PSA: gold

Post by KlangFool »

oken wrote: Mon Jul 27, 2020 5:30 pm
arcticpineapplecorp. wrote: Mon Jul 27, 2020 2:26 pm along with higher risk (standard deviation)...

Image

along with "periods of underperformance" (41% of the time, relative to "world" according to the chart below):

Image

source:
https://www.msci.com/documents/1296102/ ... 0323fc2957

not to mention, I think when factor fiends talk about momentum, I think they're talking about stocks generally, not gold.
Wait. So the volatility factor is a free lunch?
Diversity is a free lunch. A fixed allocation to a volatile asset class can helps your overall portfolio return.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
Nowizard
Posts: 3535
Joined: Tue Oct 23, 2007 5:33 pm

Re: PSA: gold

Post by Nowizard »

Ok, just fake news with the administration saying it was an EO.

Tim
bmelikia
Posts: 701
Joined: Mon Jun 15, 2009 9:23 pm

Re: PSA: gold

Post by bmelikia »

NoRegret wrote: Sat Jul 25, 2020 1:33 pm Speaking as someone with a sizable allocation to PMs I’m seeing a lot of pro-gold posts lately. Note it won’t be out of character for gold to pull back from its old high. FWIW I trimmed my miner positions this week and plan to do so again early next.

Don’t be one of those who buy at $1900 and sell at $1750. Consider DCA over 5-6 weeks If you really want to buy.

NR
Wrong forum - no one cares
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle
000
Posts: 5172
Joined: Thu Jul 23, 2020 12:04 am

Re: PSA: gold

Post by 000 »

bmelikia wrote: Mon Jul 27, 2020 6:05 pm
NoRegret wrote: Sat Jul 25, 2020 1:33 pm Speaking as someone with a sizable allocation to PMs I’m seeing a lot of pro-gold posts lately. Note it won’t be out of character for gold to pull back from its old high. FWIW I trimmed my miner positions this week and plan to do so again early next.

Don’t be one of those who buy at $1900 and sell at $1750. Consider DCA over 5-6 weeks If you really want to buy.

NR
Wrong forum - no one cares
Not sure I understand. What in NoRegret's post does no one care about?
User avatar
market timer
Posts: 6470
Joined: Tue Aug 21, 2007 1:42 am

Re: PSA: gold

Post by market timer »

whodidntante wrote: Mon Jul 27, 2020 12:51 pm
market timer wrote: Sun Jul 26, 2020 11:21 pm The formula I gave to value gold six months ago is holding up pretty well: P = 1800 * e ^ (-33 * r), where r is the 30-year real rate

Currently, r = -0.38%, so fair value is approximately $2040/oz. Back when gold was $1200 in November 2018, real yields were at 1.3%. The model predicted a fair value of $1172.

You can interpret this formula as saying gold is like an inflation-adjusted bond that pays you $1800 (inflation adjusted) after 33 years. You could tinker with the parameters ($1800, 33 years) to find the best fit, but at least the intuition seems reasonable.
Is this based on original research?
Lock wrote: Mon Jul 27, 2020 12:58 pm
market timer wrote: Sun Jul 26, 2020 11:21 pm The formula I gave to value gold six months ago is holding up pretty well: P = 1800 * e ^ (-33 * r), where r is the 30-year real rate

Currently, r = -0.38%, so fair value is approximately $2040/oz. Back when gold was $1200 in November 2018, real yields were at 1.3%. The model predicted a fair value of $1172.

You can interpret this formula as saying gold is like an inflation-adjusted bond that pays you $1800 (inflation adjusted) after 33 years. You could tinker with the parameters ($1800, 33 years) to find the best fit, but at least the intuition seems reasonable.
Markettimer - out of curiosity - where did this equation come from?
Yes, this equation is original and came out of the discussion on the thread in the link. I noted the common saying that gold historically allows you to buy a decent suit, but added the caveat that there is a strong dependence on the real interest rate. In an environment where long term real rates are 2.5%, gold will buy you a suit worth $788 in today's dollars--that's what I'd consider a decent suit. With interest rates at -0.36% today, gold buys you two of those suits and a pair of business shoes as well. I didn't tune the parameters beyond just eyeballing a 20-year chart.
Wanderingwheelz
Posts: 1412
Joined: Mon Mar 04, 2019 9:52 am

Re: PSA: gold

Post by Wanderingwheelz »

nigel_ht wrote: Mon Jul 27, 2020 5:01 pm
asif408 wrote: Mon Jul 27, 2020 3:31 pm
000 wrote: Mon Jul 27, 2020 3:26 pm It's amazing how vocal the 100% US crowd has become here, even including prominent members.
It's as bad as I've seen it in my 6 years here.
I moved more into international. hated to do it but it's a hedge as I move toward retirement. Same for gold. It's not there to make me rich. It's there not make sure I don't end up broke.
I too have recently increased my international exposure and plan to increase it some more.
3 Fund Portfolio. 70/30 AA. No mortgage. Simplicity is key.
Post Reply