Gold!

[Ayahuasca]

Gold is a great investment for protecting wealth.

All in production costs of gold mines are about 1,300 an ounce, which is about the current price, meaning that new gold production is less likely. Supplies may therefore fall, which will support a rising price.

[Ayahuasca]

I would invest in physical gold, not gold mine shares or ETFs but something like a bullion fund.

[Ayahuasca]

There was a guy on here years ago, goldbug? He advocated buying gold and was poo-pooed by most here, including me. Well, he had the last laugh.

[rustyuk]

I've read the same book and took away a slightly different strategy regarding gold and silver. The author advocates investing in precious metals but not blindly. He uses RSI and other sources as buy and sell indicators.

[Scootersp]

DonkeyApple said:

It is hugely impacted by currency issues as it’s priced in USD and we live in GBP land.

Just look at the GoldGBP price on Brexit day to see the effect.

Well yes, I meant currency collapses not day to day year to year fluctuations, if the dollar collapsed or sterling tanked etc etc then in the end Gold will have a worth similar to what it always had in 'x' currency.

If an American had $10K in currency and $10K of purchased gold now vs a $20K currency only American they would be far better off if America did a Zimbabwe.

It's 'worth' is in itself, not in a promise is what I meant by not affected by currency, so it will retain wealth in the long term, regardless of currency worth at any particular point in time.

[Ayahuasca]

Gold is a great long-term store of wealth that more or less keeps up with inflation.

Here is some fag-packet maths that prove it:

Salary of a carpenter in 1800s = £110

Value of a gold sovereign (8g of gold) in the 1800s = £1

So our carpenter earned 110 gold sovereigns.

Value of 8g of gold today 9 (ignoring any sovereign numismatic value) = about $40 x 8 = $320

Today's value of the 1800's salary = $320 x 110 = $35,200 or about £25,000

Average income for a carpenter in 2018 is about £25,000 !!


Another way of looking at it:

In the 1800's an ounce of gold would buy you a pretty good suit.
In 2018 an ounce of gold ( $1,300 or so) will also buy you a pretty good suit.


Of course, if you had invested into shares in the 1800's, you would have made far more money.

But you might also have lost it all.

If you had invested into property, you would have made far more too, but how much property can you buy on a workman's salary? You can buy a single gold coin. You cannot buy a single square metre of property.

Edited by Ayahuasca on Wednesday 11th April 16:07

[colin79666]

Funny I just bought a sovereign having sold some of my Bitcoin punt.

I don’t expect the gold to increase like the Bitcoin did (£5 turned into £500) but neither will it swing about in value so dramatically.

I’ve also recently read the how to own the world book and came to a similar conclusion as others. I’m not going to invest a significant sum in precious metals but diversifying my investments with a little is probably a good thing. My investments are also small scale so fees associated with securely storing gold in a vault or frequent trading would outweigh the benefits.

[sideways sid]

There is little point to invest in physical gold in isolation, given that it costs money to store and/or insure, incurs significant transaction costs, and produces no income.

As part of a diversified portfolio, I can see the merit in using it as hedge against inflation, uncorrelated to other assets, but have not seen evidence that this argument actually stands.

I would suggest that most people invest in other income-producing assets, and if really concerned about armageddon, buy a few gold kruggerands as a ready store of value, or diamonds which serve similar purpose but are more portable!

[DonkeyApple]

Ayahuasca said:

Gold is a great long-term store of wealth that more or less keeps up with inflation.

Here is some fag-packet maths that prove it:

Salary of a carpenter in 1800s = £110

Value of a gold sovereign (8g of gold) in the 1800s = £1

So our carpenter earned 110 gold sovereigns.

Value of 8g of gold today 9 (ignoring any sovereign numismatic value) = about $40 x 8 = $320

Today's value of the 1800's salary = $320 x 110 = $35,200 or about £25,000

Average income for a carpenter in 2018 is about £25,000 !!


Another way of looking at it:

In the 1800's an ounce of gold would buy you a pretty good suit.
In 2018 an ounce of gold ( $1,300 or so) will also buy you a pretty good suit.


Of course, if you had invested into shares in the 1800's, you would have made far more money.

But you might also have lost it all.

If you had invested into property, you would have made far more too, but how much property can you buy on a workman's salary? You can buy a single gold coin. You cannot buy a single square metre of property.

Edited by Ayahuasca on Wednesday 11th April 16:07

Except when neither wages nor the price of gold keep up with inflation.

I’m guessing you’re long from higher levels?

[Ayahuasca]

DonkeyApple said:

Except when neither wages nor the price of gold keep up with inflation.

I’m guessing you’re long from higher levels?

You think I am trying to talk up the price?

This is PH, not the Motley Fool.

[vindaloo79]

Downside of purchasing physical is it leaves and audit trail: http://www.dailymail.co.uk/news/article-3785905/Ma...

Someone will always know you had it.

BullionVault is good, I use it for a small holding. Enough for a few suits perhaps. I think if the st really hits the fan then owning physical (Britannia Coins - CGT tax free) is preferred, but i wouldn't want that much wealth in the house,

[DonkeyApple]

Ayahuasca said:

DonkeyApple said:

Except when neither wages nor the price of gold keep up with inflation.

I’m guessing you’re long from higher levels?

You think I am trying to talk up the price?

This is PH, not the Motley Fool.

It certainly seems like it. All the same traits. Example of one person who may have made money, claims that aren’t strictly correct and then multiple postings on gold all the time.

Wasn’t it about 5 years ago when gold was at $1300 that we had the same discussion and I explained that gold wouldn’t be going anywhere for a long time? I believe I mentioned that it would require QE to end and the BRICS to increase reserves in the open market. Nothing else really matters. QE is tapering so you’ve seen a recovery from 2016 but any signs of China or Russia buying?

But all of that is moot as nearly all the time retail investors are confusing gold with cable and in fact just trading cable via the incredibly expensive medium of gold. Pull up the 5 year charts for gold in both USD and GBP and feel free to explain why for someone who is based in GBP trading gold is a credible strategy.

Also, how does it store wealth for the average U.K. individual?

How does it match inflation or protect against it?

Ever since 2008 we’ve had endless websites, charlatans, scammers, liars, thieves and scaremongers trying to convince the average retail investor to take long side exposure in gold. But for what exact reason? Genuinely, list the credible benefits to the average person in the U.K. in taking on currency exposure and holding a product that has no use to them and no yield, an opportunity cost.

The thing about gold is that it serves zero credible investment opportunity for the average U.K. investor or individual. In fact it is worse than that as the vast majority lose wealth through holding it.

It spikes in value every second or third decade due to economic fears. If you just happen to be holding at the start of one of those events then you might make a profit but at all other times it is an FX play over Cable and a very expensive and inefficient way to do so.

It’s an asset that only has credible viability to the very wealthy, those who invest over multiple major currencies and those whose wealth vastly exceeds any protections offered by the jurisdictions that they hold funds within. So, if you base your wealth out of Cayman and have a blended portfolio of assets in the US, UK, EU and the BRICS then a store of gold has great credibility and value and you can offset its cost by using it as part of your currency hedging program. If you’re just a normal, average salary earner in the UK, sitting in an average house, living an average life then paying wide costs to buy something that costs you to keep, ignoring that it’s a currency trade, ignoring the risks of storage, ignoring the drivers for the price then unless you have a cultural legacy of ‘flight’ such as the Jews or Indians there is genuinely no economic logic to buying gold. It’s really just a bit of fun to have a few dozen krugerands and sovereigns piled in a metal box in the floor to be opened and pretend to be Scrooge McDuck for a moment.

[trowelhead]

DonkeyApple said:

Ayahuasca said:

DonkeyApple said:

Except when neither wages nor the price of gold keep up with inflation.

I’m guessing you’re long from higher levels?

You think I am trying to talk up the price?

This is PH, not the Motley Fool.

It certainly seems like it. All the same traits. Example of one person who may have made money, claims that aren’t strictly correct and then multiple postings on gold all the time.

Wasn’t it about 5 years ago when gold was at $1300 that we had the same discussion and I explained that gold wouldn’t be going anywhere for a long time? I believe I mentioned that it would require QE to end and the BRICS to increase reserves in the open market. Nothing else really matters. QE is tapering so you’ve seen a recovery from 2016 but any signs of China or Russia buying?

But all of that is moot as nearly all the time retail investors are confusing gold with cable and in fact just trading cable via the incredibly expensive medium of gold. Pull up the 5 year charts for gold in both USD and GBP and feel free to explain why for someone who is based in GBP trading gold is a credible strategy.

Also, how does it store wealth for the average U.K. individual?

How does it match inflation or protect against it?

Ever since 2008 we’ve had endless websites, charlatans, scammers, liars, thieves and scaremongers trying to convince the average retail investor to take long side exposure in gold. But for what exact reason? Genuinely, list the credible benefits to the average person in the U.K. in taking on currency exposure and holding a product that has no use to them and no yield, an opportunity cost.

The thing about gold is that it serves zero credible investment opportunity for the average U.K. investor or individual. In fact it is worse than that as the vast majority lose wealth through holding it.

It spikes in value every second or third decade due to economic fears. If you just happen to be holding at the start of one of those events then you might make a profit but at all other times it is an FX play over Cable and a very expensive and inefficient way to do so.

It’s an asset that only has credible viability to the very wealthy, those who invest over multiple major currencies and those whose wealth vastly exceeds any protections offered by the jurisdictions that they hold funds within. So, if you base your wealth out of Cayman and have a blended portfolio of assets in the US, UK, EU and the BRICS then a store of gold has great credibility and value and you can offset its cost by using it as part of your currency hedging program. If you’re just a normal, average salary earner in the UK, sitting in an average house, living an average life then paying wide costs to buy something that costs you to keep, ignoring that it’s a currency trade, ignoring the risks of storage, ignoring the drivers for the price then unless you have a cultural legacy of ‘flight’ such as the Jews or Indians there is genuinely no economic logic to buying gold. It’s really just a bit of fun to have a few dozen krugerands and sovereigns piled in a metal box in the floor to be opened and pretend to be Scrooge McDuck for a moment.

Brilliant post, as always DA!

For your average uk investor, gold seems quite pointless to own vs property / equities / bonds etc.

For me it's simply because it produces no income. With property or shares you have rents or dividends which can be reinvested and over time will generate a snowball effect. There is a logical and sound path to wealth, almost mathematical, with some risk along the way of course.

If something is producing regular income, it will always have a value between a set range of points driven by the yield

[trowelhead]

Anyone have any thoughts on the portfolio shown here:

https://plainenglishfinance.co.uk/how-to-own-the-w...

Particularly the 7IM fund?

I'm assuming fundsmith + 7IM just those two funds alone (no weightings shown however) is deemed enough global diversification. Interesting as i assumed they would have put their own clients into trackers...

[CzechItOut]

trowelhead said:

Anyone have any thoughts on the portfolio shown here:

https://plainenglishfinance.co.uk/how-to-own-the-w...

Particularly the 7IM fund?

I'm assuming fundsmith + 7IM just those two funds alone (no weightings shown however) is deemed enough global diversification. Interesting as i assumed they would have put their own clients into trackers...

They are both very UK-centric, 7IM is over 10% UK and Fundsmith nearly 20%. If you think the British economy is going down the toilet post-Brexit you might want to diversify a bit further.

On the flip side Fundsmith has produced stellar results and Mr Smith would argue that his fund is insulated from wider market fluctuations because he is invested in a small number of good value companies.

[bitchstewie]

trowelhead said:

Anyone have any thoughts on the portfolio shown here:

https://plainenglishfinance.co.uk/how-to-own-the-w...

Particularly the 7IM fund?

I'm assuming fundsmith + 7IM just those two funds alone (no weightings shown however) is deemed enough global diversification. Interesting as i assumed they would have put their own clients into trackers...

PEF have their own fund "VT PEF GLOBAL MULTI-ASSET FUND".

[Ayahuasca]

I am a fairly recent convert to gold as an investment, I always previously argued (as some here do) that as a non-income producing asset it inferior to stocks, bonds, etc and therefore any intelligent investor should avoid it.

Personally I have a few bits and bobs of gold - nothing major.

However - I am looking at it from the POV of a relatively unsophisticated investor with a relatively unsophisticated adviser (this captures about 80% of the market....)

The most important asset the average person owns is not his house, or his pension, or his car. It is his income. The average UK person earns about £35,000 a year. Over a working life say 20-65 he will earn about £1.5 million. But at the end of the day that the amount earned does not matter. All that matters is : 'How much of that £1.5m did you manage to save?' For the VAST majority of people, the £1.5m is spent on valueless 'stuff'. Cars, holidays, house moving costs, clothes, etc, etc.

So clearly a key determinant of the average unsophisticated person's wealth is savings. They need to save. They need to save a chunk of income, and they need to save it long term, and they need to save it in something that can keep pace with inflation. If, at the end of the savings period, the person has only their capital returned to them, in real terms, without a penny of interest, they will be ecstatic, and they will be better off that the majority of the population.

But, the average person does not save anywhere near enough.

Why? Through fear. They have been 'educated' through countless miss-selling scandals, through 'a mate who did XYZ and lost his money' through a rapacious and sophisticated financial services industry that sees advisers turning up in their Porsches to visit poor clients, through products that are designed (yes, specifically designed..) to be so opaque that the unsophisticated adviser has little hope of fully understanding them, that investment is something to run away from. The financial services industry employs salespeople who would make double-glazing and secondhand car sales managers shudder with horror.

Then, they buy a savings plan and pay into it for a few years. The funds are rarely reviewed or managed. The original adviser is rarely available. The investor is often abandoned ('orphaned' in the industry jargon..) and he sees no value in his savings plan so it lapses. The unsophisticated adviser is unlikely to pay for an IFA to help him. The average long term savings plan, set up for 10-15+ years is stopped within 3-4 years. So the whole things turns to dogst and the only winners are the savings plan provider and the original salesperson. If the unsophisticated investor tries to cut out the salesman, he is in a worse position. He has no real idea of what to buy or how to do it. He has no idea how to manage money. Thus, he steers well clear.

This is where gold comes in: it is a good store of value. It is unlikely to lose very much. It is possible for it to keep pace with inflation. It is simple. It is easy to understand. Everybody and his dog would love to have a roomful of the stuff. It has a price which is easily understood. Yes, it pays no dividends, but equally it is not subject to bankruptcy, management changes, takeovers, stock-market crashes. Everyone can 'get' why gold is a good thing to own. Thus, in my opinion, it is a great investment for that demographic. And you do not need a sophisticated adviser to buy it for you.

Obviously powerfully built Red Bull swilling PHers with several directorships will have more sophisticated options available to them, but they are in the minority.

[JulianPH]

DonkeyApple said:

Except when neither wages nor the price of gold keep up with inflation.

I’m guessing you’re long from higher levels?

Exactly. Gold is one of the few investments you have to pay every year for the privilege of holding/investing.

Why would you do this? Equities pay YOU for holding them (dividends).

Madness, but as the Donkey said, a good hedge on a large portfolio/fund when required (even then it doesn't work, trust me!).

[JulianPH]

OP - I forgot to add (as no one else has done so), always believe in your soul.

(Gold! - if you don't get it you missed the 80's)

[DonkeyApple]

Ayahuasca said:

I am a fairly recent convert to gold as an investment, I always previously argued (as some here do) that as a non-income producing asset it inferior to stocks, bonds, etc and therefore any intelligent investor should avoid it.

Personally I have a few bits and bobs of gold - nothing major.

However - I am looking at it from the POV of a relatively unsophisticated investor with a relatively unsophisticated adviser (this captures about 80% of the market....)

The most important asset the average person owns is not his house, or his pension, or his car. It is his income. The average UK person earns about £35,000 a year. Over a working life say 20-65 he will earn about £1.5 million. But at the end of the day that the amount earned does not matter. All that matters is : 'How much of that £1.5m did you manage to save?' For the VAST majority of people, the £1.5m is spent on valueless 'stuff'. Cars, holidays, house moving costs, clothes, etc, etc.

So clearly a key determinant of the average unsophisticated person's wealth is savings. They need to save. They need to save a chunk of income, and they need to save it long term, and they need to save it in something that can keep pace with inflation. If, at the end of the savings period, the person has only their capital returned to them, in real terms, without a penny of interest, they will be ecstatic, and they will be better off that the majority of the population.

But, the average person does not save anywhere near enough.

Why? Through fear. They have been 'educated' through countless miss-selling scandals, through 'a mate who did XYZ and lost his money' through a rapacious and sophisticated financial services industry that sees advisers turning up in their Porsches to visit poor clients, through products that are designed (yes, specifically designed..) to be so opaque that the unsophisticated adviser has little hope of fully understanding them, that investment is something to run away from. The financial services industry employs salespeople who would make double-glazing and secondhand car sales managers shudder with horror.

Then, they buy a savings plan and pay into it for a few years. The funds are rarely reviewed or managed. The original adviser is rarely available. The investor is often abandoned ('orphaned' in the industry jargon..) and he sees no value in his savings plan so it lapses. The unsophisticated adviser is unlikely to pay for an IFA to help him. The average long term savings plan, set up for 10-15+ years is stopped within 3-4 years. So the whole things turns to dogst and the only winners are the savings plan provider and the original salesperson. If the unsophisticated investor tries to cut out the salesman, he is in a worse position. He has no real idea of what to buy or how to do it. He has no idea how to manage money. Thus, he steers well clear.

This is where gold comes in: it is a good store of value. It is unlikely to lose very much. It is possible for it to keep pace with inflation. It is simple. It is easy to understand. Everybody and his dog would love to have a roomful of the stuff. It has a price which is easily understood. Yes, it pays no dividends, but equally it is not subject to bankruptcy, management changes, takeovers, stock-market crashes. Everyone can 'get' why gold is a good thing to own. Thus, in my opinion, it is a great investment for that demographic. And you do not need a sophisticated adviser to buy it for you.

Obviously powerfully built Red Bull swilling PHers with several directorships will have more sophisticated options available to them, but they are in the minority.

Please don’t take this the wrong way as it is my distinct lack of verbal skills that prevent me from find a nice way to say that is is absolutely bonkers and is verging on Freemen of the Land lunacy.

Gold is a terrible store of wealth for the average salary earner in the U.K. the gold price very clearly does crash just like stock markets. Gold due to its lack of regulation has more scammers operating in it than any regulated instrument. Gold has high transaction costs. The salary stuff is also a very strange argument as for the bulk of average income earners in the U.K. the most significant element of their salary goes firstly on taxation and secondly on housing and finally on pension. Ergo, the primary objective of anyone is to be as tax efficient as possible, to manage their property debt as best as possible and to save enough to create an income when they can no longer earn one from third parties. The average income earner in the U.K. simply does not have spare money to be throwing at wholly innapripriate speculative punts such as gold coins!!

Arguing that any intelligent investor should ignore gold is wholly incorrect. Recognising what type of investor can obtain a return from gold and what that return is is what is important.