Gold - whats it going to do?
Discussion
Interested in an opinion from the experts (and the aledged experts ;-)
I know the theory that when economy is up, gold is down, when interest rates are high gold is low etc, and that currently although not at the all time high levels is prety strong at the moment. But, we keep getting told that things are on the up, unemployment in USA at record lows just reciently, everyone is doing well, etc etc - but the reality is that its certainly not glory days yet.
so - is Gold worth holding for the next 1 year / 2 years / 5 years currently?
I know the theory that when economy is up, gold is down, when interest rates are high gold is low etc, and that currently although not at the all time high levels is prety strong at the moment. But, we keep getting told that things are on the up, unemployment in USA at record lows just reciently, everyone is doing well, etc etc - but the reality is that its certainly not glory days yet.
so - is Gold worth holding for the next 1 year / 2 years / 5 years currently?
I wonder if things will ever be that simple and that binary again anymore? In a world where information changes hourly, there don't seem to be as many long term trends, yet alone linear ones (that's twice I've used that word in 10 minutes). You make a really good point about interest rate rises.
Mark Carney is hinting that they will rise in November so is he getting us ready for the twin peak risks of inflation and interest rate rises? There seems to be quite closely co-ordinated activity from various central banks right now and if you look at what the fund managers are doing, pension schemes seem to be digging in and shoring up portfolios in preparation.
We also have to take a view on QE within the Eurozone, inflation is falling yet the ECB seems reluctant still, to engage with the topic of QE. We live in a massively connected world where we have all that in our faces, and where now also, the Peshmerga and IS are kicking off and rusk sucking us in, and Ukraine offers (at best) energy uncertainty from unrest in that particular region.
Some fixed income funds (the more 'safer' funds) are looking at floating assets as a hedge against interest rate rises and some multi-asset portfolios are now overweight in variable rate fixed income. If we needed further proof, the launch of a new long index-linked gilt the week before last did so well that our Debt Management Office - the DMO (the dept that issues Gilts) is now going to increase the amount of money it seeks to raise for linked Gilts - it was after £5 billions from the most recent auction - it got £14 billions. I think that's the first time it has happened, certainly to that extent and certainly in a long, long time.
http://www.dmo.gov.uk/docs//gilts/press/pr290714a....
If we assume though, that expectations of higher inflation and interest rates will have an impact, outflows from equity funds in the US are creeping up, and that money going into index linked bonds, and a smattering of emerging markets. European institutional investors (read 'the person who's managing pension funds' etc) have invested more than £4.8bns into index-linked bonds in Q2 of 2014, compared with outflows of £1.1bn in Q1. They have ploughed £13.5bns into fixed income in Q2 of this year compared with inflows of £2.5bn in Q1.
http://www.lipperusfundflows.com/#create:newsline:...
As a niche investment, I wonder if gold has a place. But I don't think you can hang your hat on it with any degree of certainty right now (just my personal thoughts).
Mark Carney is hinting that they will rise in November so is he getting us ready for the twin peak risks of inflation and interest rate rises? There seems to be quite closely co-ordinated activity from various central banks right now and if you look at what the fund managers are doing, pension schemes seem to be digging in and shoring up portfolios in preparation.
We also have to take a view on QE within the Eurozone, inflation is falling yet the ECB seems reluctant still, to engage with the topic of QE. We live in a massively connected world where we have all that in our faces, and where now also, the Peshmerga and IS are kicking off and rusk sucking us in, and Ukraine offers (at best) energy uncertainty from unrest in that particular region.
Some fixed income funds (the more 'safer' funds) are looking at floating assets as a hedge against interest rate rises and some multi-asset portfolios are now overweight in variable rate fixed income. If we needed further proof, the launch of a new long index-linked gilt the week before last did so well that our Debt Management Office - the DMO (the dept that issues Gilts) is now going to increase the amount of money it seeks to raise for linked Gilts - it was after £5 billions from the most recent auction - it got £14 billions. I think that's the first time it has happened, certainly to that extent and certainly in a long, long time.
http://www.dmo.gov.uk/docs//gilts/press/pr290714a....
If we assume though, that expectations of higher inflation and interest rates will have an impact, outflows from equity funds in the US are creeping up, and that money going into index linked bonds, and a smattering of emerging markets. European institutional investors (read 'the person who's managing pension funds' etc) have invested more than £4.8bns into index-linked bonds in Q2 of 2014, compared with outflows of £1.1bn in Q1. They have ploughed £13.5bns into fixed income in Q2 of this year compared with inflows of £2.5bn in Q1.
http://www.lipperusfundflows.com/#create:newsline:...
As a niche investment, I wonder if gold has a place. But I don't think you can hang your hat on it with any degree of certainty right now (just my personal thoughts).
Some interesting (and some complex) comments there that i did have to google a bit 
(i am good at counting, mostly wiv me fingers). Also been wondering that modern day communications, media and teh speed that data and knowledge travels are erasing traditional long term trends like teh much talked about 7 and 12 years cycles etc etc
Part of where i was coming from here is that i live in Thailand where for many, gold is seen as the defaut savings plan, buy a 2 baht (weight) cold necklass to "save you" from spending your money, 8 months later you are a bit short on cash to pay teh rent, can put it back into the shop and get the current value / a %age on loan at 0.5% for 3 months - default and the shop keeps. But many people have a lot of cash tied up in gold, either jewlery or gold bars, wondering what might happen to the domestic economy here if there was say a 20% drop in value. I don't know the stats but Thailand must have one of the largest privately held gold reserves as a combined nation!
- my post count got seriously increased during the guess the car thread from 3 or 4 years ago!!! i got a bit obsessed.... much like blib and his shadows these days !!!!
(i am good at counting, mostly wiv me fingers). Also been wondering that modern day communications, media and teh speed that data and knowledge travels are erasing traditional long term trends like teh much talked about 7 and 12 years cycles etc etc Part of where i was coming from here is that i live in Thailand where for many, gold is seen as the defaut savings plan, buy a 2 baht (weight) cold necklass to "save you" from spending your money, 8 months later you are a bit short on cash to pay teh rent, can put it back into the shop and get the current value / a %age on loan at 0.5% for 3 months - default and the shop keeps. But many people have a lot of cash tied up in gold, either jewlery or gold bars, wondering what might happen to the domestic economy here if there was say a 20% drop in value. I don't know the stats but Thailand must have one of the largest privately held gold reserves as a combined nation!
Ginge R said:
PS: We joined the board at the same time, but you've been a hell of a lot more busy than me!
it just means that you have been working harder than me - my post count got seriously increased during the guess the car thread from 3 or 4 years ago!!! i got a bit obsessed.... much like blib and his shadows these days !!!! Ginge R said:
Mark Carney is hinting that they will rise in November so is he getting us ready for the twin peak risks of inflation and interest rate rises? There seems to be quite closely co-ordinated activity from various central banks right now and if you look at what the fund managers are doing, pension schemes seem to be digging in and shoring up portfolios in preparation.
Not now....What's gold going to do? - Nothing - it's pretty inert, but apart from the flip answer, who knows? Like any investment, if you knew, you'd make a fortune. There are Gold Bugs (often keen on conspiracy theories about evil "governments" deliberately pushing the value down and often keen on survivalism) obsessed with holding physical gold as the only true currency, keeping its worth when fiat paper, bitcoin etc currencies evaporate, as they believe will happen any moment, but others say that gold has very limited uses in electronics, jewellery and as a putative store of value, but is expensive to buy and keep in a physical form (buying derivatives isn't an option for the hard core gold bugs), has a huge spread if you buy coins or bars, often shows unpredictable swings in value and, perhaps most importantly doesn't yield an income. If you believe that the world paper/digital economy is about to implode then it is a sure-fire investment.
With the bizarre movements in all assets at the moment - economic indicators improve and companies become leaner and more profitable but the stock market drops because tapering will accelerate.... gold may be as good as anything else but it's not for me (except as a crown for a skanky molar tooth, where its physical properties make it the material of choice).
With the bizarre movements in all assets at the moment - economic indicators improve and companies become leaner and more profitable but the stock market drops because tapering will accelerate.... gold may be as good as anything else but it's not for me (except as a crown for a skanky molar tooth, where its physical properties make it the material of choice).
+1, you always see the posts/articles from gold bugs (just like the classic car bugs, property bugs etc etc), and too be honest they are persuasive. I can't help but think they are either trying to talk up the market as they want to exit or they simply work selling Gold/ Classic cars /Property. Seen a few articles in the papers that read more like paid for adverts.
You pay a premium over the spot price and of course you sell below the spot price, so you need a price rise just to break even, and of course there is no dividend.
Never really understood their claims; if the currencies fail so will law & order, then goldbug & family will gladly "donate" their gold to that small group of armed people who now "govern" the area.
I guess some people prefer something tangible (understandable) but when it falls in price you have lost money. I nearly bought some a few years ago, mainly because of the current punishment by Government(s) of anyone who dares to have money in a saving account. In the end I decided not to bother as I decided I didn't really know if what what I was buying (if the quality was as they claimed and I had no use for it until I sell (I accept my car falls in price as it gets me to work, I accept my house falling in price as I need somewhere to live (as I am more concerned about my kids and grandkids affording a home, and not getting into huge debt to do it), a lump of Gold with the sole purpose of holding value falling in price is much harder to accept; even shares pay a dividend (hopefully)), and I am very glad I didn't buy as it has fallen in price significantly since then.
The way I look at it is governments look like they will keep spending at unsustainable levels until the people actually vote them out or markets stop letting them, it might only be a matter of time before a country starts selling its gold reserves to allow it to keep spending a bit longer, but I am not interested.
I think it is just a speculative asset, so who knows where it will go (I haven't got a clue, and I doubt others do either). What ever position you take good luck to you
You pay a premium over the spot price and of course you sell below the spot price, so you need a price rise just to break even, and of course there is no dividend.
Never really understood their claims; if the currencies fail so will law & order, then goldbug & family will gladly "donate" their gold to that small group of armed people who now "govern" the area.
I guess some people prefer something tangible (understandable) but when it falls in price you have lost money. I nearly bought some a few years ago, mainly because of the current punishment by Government(s) of anyone who dares to have money in a saving account. In the end I decided not to bother as I decided I didn't really know if what what I was buying (if the quality was as they claimed and I had no use for it until I sell (I accept my car falls in price as it gets me to work, I accept my house falling in price as I need somewhere to live (as I am more concerned about my kids and grandkids affording a home, and not getting into huge debt to do it), a lump of Gold with the sole purpose of holding value falling in price is much harder to accept; even shares pay a dividend (hopefully)), and I am very glad I didn't buy as it has fallen in price significantly since then.
The way I look at it is governments look like they will keep spending at unsustainable levels until the people actually vote them out or markets stop letting them, it might only be a matter of time before a country starts selling its gold reserves to allow it to keep spending a bit longer, but I am not interested.
I think it is just a speculative asset, so who knows where it will go (I haven't got a clue, and I doubt others do either). What ever position you take good luck to you
Edited by GrizzlyBear on Friday 15th August 13:48
Article in FT today about gold. Essentially:
1. Geopolitical events seem only to have transitory effects now - ~$1300/oz before plane shot down over Ukraine, Gaza, ISIS sweeping through Iraq and it's now ~ $1315/oz. By comparison, in 1980, when the Soviets invaded Afghanistan and Iranian students took over the US embassy, gold hit $850/oz (>$2000 in today's money).
2. Inflation protection - "gold is the only asset that does not have its real value reduced by inflation, but its long term returns are too poor for it to be considered true protection against inflation - average return in real terms has been just over 1% p.a."
3. Gold price inversely correlated with stock market prices for only about half of the past 40 years.
4. However, there are psychological factors - "Gold is viewed as insurance against things that [sic] are difficult to predict and unlikely to occur but which would be very expensive if they did. Like, for instance, the complete implosion of the financial system..." as we discussed above.
The editor commented that most advisers recommend 5-10% allocation to gold - but that wouldn't bale you out if scenario 4 happened and as one of Reagan's advisers "memorably said, bottled water, canned beans and flashlight batteries will be the place to be invested." Plus, as mentioned above, weapons to protect your gold if you have any, or to extract it from others... back to the survivalists!
Re: bullion and coins - am I right in thinking that there is VAT to pay on the former but not the latter so long as they are legal tender? If so then, assuming the spreads on physical gold bars and coins are the same then coins would be bought and sold ex-vat and therefore cheaper.
1. Geopolitical events seem only to have transitory effects now - ~$1300/oz before plane shot down over Ukraine, Gaza, ISIS sweeping through Iraq and it's now ~ $1315/oz. By comparison, in 1980, when the Soviets invaded Afghanistan and Iranian students took over the US embassy, gold hit $850/oz (>$2000 in today's money).
2. Inflation protection - "gold is the only asset that does not have its real value reduced by inflation, but its long term returns are too poor for it to be considered true protection against inflation - average return in real terms has been just over 1% p.a."
3. Gold price inversely correlated with stock market prices for only about half of the past 40 years.
4. However, there are psychological factors - "Gold is viewed as insurance against things that [sic] are difficult to predict and unlikely to occur but which would be very expensive if they did. Like, for instance, the complete implosion of the financial system..." as we discussed above.
The editor commented that most advisers recommend 5-10% allocation to gold - but that wouldn't bale you out if scenario 4 happened and as one of Reagan's advisers "memorably said, bottled water, canned beans and flashlight batteries will be the place to be invested." Plus, as mentioned above, weapons to protect your gold if you have any, or to extract it from others... back to the survivalists!
Re: bullion and coins - am I right in thinking that there is VAT to pay on the former but not the latter so long as they are legal tender? If so then, assuming the spreads on physical gold bars and coins are the same then coins would be bought and sold ex-vat and therefore cheaper.
Revisitph said:
Re: bullion and coins - am I right in thinking that there is VAT to pay on the former but not the latter so long as they are legal tender? If so then, assuming the spreads on physical gold bars and coins are the same then coins would be bought and sold ex-vat and therefore cheaper.
No VAT on gold, bars or coins.No CGT on British Coins.
XJSJohn said:
Part of where i was coming from here is that i live in Thailand where for many, gold is seen as the defaut savings plan, buy a 2 baht (weight) cold necklass to "save you" from spending your money, 8 months later you are a bit short on cash to pay teh rent, can put it back into the shop and get the current value / a %age on loan at 0.5% for 3 months - default and the shop keeps. But many people have a lot of cash tied up in gold, either jewlery or gold bars, wondering what might happen to the domestic economy here if there was say a 20% drop in value. I don't know the stats but Thailand must have one of the largest privately held gold reserves as a combined nation!
India is probably higher. By default most Indians consider Gold as being the 'saving of choice' as there isn't the same level of confidence with banks as we have... (although they could be onto something there..) You also need to consider the cultural value of gold. Most western nations and the associated populace are comfortable with the idea of a piece of paper having 'value'. Most Eastern nations like to be able to hold something of substance. (But hey.. you probably know that anyway).Money Weekly fairly regularly have articles on gold. In short... Nobody really knows! At the moment it's on the lower end of where it was 5 -6 years ago but that's not to say that the market isn't going to collapse (unlikely) or balloon rapidly (also unlikely). Two items of note though.. There have been murmurs that the number of commercially gold seams are starting to thin out. This would indicate a potential price hike. However... There are also rumours that some of the sea mining fact finding tours are finding lots of potential not too far into the ocean floor. Gold is a safe bet as it will always have value. If you're buying for investment purposes then beware... The allure of the yellow metal has stung many an investor.
Snoggledog said:
XJSJohn said:
Part of where i was coming from here is that i live in Thailand where for many, gold is seen as the defaut savings plan, buy a 2 baht (weight) cold necklass to "save you" from spending your money, 8 months later you are a bit short on cash to pay teh rent, can put it back into the shop and get the current value / a %age on loan at 0.5% for 3 months - default and the shop keeps. But many people have a lot of cash tied up in gold, either jewlery or gold bars, wondering what might happen to the domestic economy here if there was say a 20% drop in value. I don't know the stats but Thailand must have one of the largest privately held gold reserves as a combined nation!
India is probably higher. By default most Indians consider Gold as being the 'saving of choice' as there isn't the same level of confidence with banks as we have... (although they could be onto something there..) You also need to consider the cultural value of gold. Most western nations and the associated populace are comfortable with the idea of a piece of paper having 'value'. Most Eastern nations like to be able to hold something of substance. (But hey.. you probably know that anyway)..
Interesting (and logical given where most of you are) how most of the responses have been about buying into a gold fund, or "gold coins v gold bars and VAT" ... i was thinking in asia where there is no (advertised) vat on gold in any form, be it jewlery, bars or coins, only a surcharge (usually around GBP15 - 30) for the "craftsman" to make into jewlery to be worn and when people buy gold they go into a licensed gold trading shop that sells based on weight and the market value of that day, walking out with the actual gold.
So what happens when you have most of the working classes in these powerful Asian economies all keeping their savings around their necks rather than in the bank as cash? I suppose one of the plus points is that if a bank starts to fail (northern rock style) you dont get such a big run of people taking cash out causing the implosion to be even greater, as people have spread the risk out.
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