Investing in gold

[lidds]

Chards bullion(been going for years) is cheaper,but needs paying for by debit card,Bullion by Post take credit cards and have more stock.

[WY86]

Owning actual gold always strikes me as one of those investments where the middle men make most of the money.

Say gold was worth x would they buy it at that or would you get below x because they need to arrange secure transport, then smelt it down, etc etc?

Maybe a wrong source of learning but whenever i watch pawn stars or programs alike they never seem to offer the actual amount its worth its always way lower.

[Scootersp]

WY86 said:

Owning actual gold always strikes me as one of those investments where the middle men make most of the money.

Say gold was worth x would they buy it at that or would you get below x because they need to arrange secure transport, then smelt it down, etc etc?

Maybe a wrong source of learning but whenever i watch pawn stars or programs alike they never seem to offer the actual amount its worth its always way lower.

That's just like used cars? if you go for the instant redeemable option (p/x) you pay the price for it, they take it in for resale (forecourt stock), then sell for a premium with a more certainty of it being genuine (warranty/legal comeback)

You are just sacrificing some money for convenience/lower risk of the trade?

[WY86]

Scootersp said:

That's just like used cars? if you go for the instant redeemable option (p/x) you pay the price for it, they take it in for resale (forecourt stock), then sell for a premium with a more certainty of it being genuine (warranty/legal comeback)

You are just sacrificing some money for convenience/lower risk of the trade?

True but i would not see a used car as an investment like gold.

[Scootersp]

Well you can buy etf's and not incur lower levels of fees.....very little comes without some sort of transaction cost.

[Scootersp]

Well you can buy etf's and not incur lower levels of fees.....very little comes without some sort of transaction cost.

[pingu393]

WY86 said:

Scootersp said:

That's just like used cars? if you go for the instant redeemable option (p/x) you pay the price for it, they take it in for resale (forecourt stock), then sell for a premium with a more certainty of it being genuine (warranty/legal comeback)

You are just sacrificing some money for convenience/lower risk of the trade?

True but i would not see a used car as an investment like gold.

He's using it as an example. I get the example and think it's a valid one.

I buy from BullionByPost (at 5% above spot price) and sell to a local guy in the town who matches their price (at 5% below spot price). I have a comeback it BullionByPost sell me some lead. The guy down the road is taking a risk paying me cash for something that might not be what I say it is.

Used car market is a good example.

[Derek Chevalier]

Scootersp said:

That volatility means at some point it must over and under perform bonds.

Looking at the volatility, you should expect it to perform more in line with equities given the volatility.

Scootersp said:

Not sure how relevant they are, but some use metrics like the Dow ratio (gold has been 1:1 a couple of times in the past etc) and the historic holdings of it being at multi decade lows etc (it's about as unloved as possible on here (everywhere) it seems, seen as largely pointless/ineffective?).

With equities you have reasonably accepted frameworks for valuations (P/B, P/E etc), and this can give some indication whether something is cheap/expensive relative to other shares (share A vs share B) or vs an individual share's historical price (share A is now on a P/E of 40 vs 20 a few years ago). That's not to say the share won't stay cheap/expensive for a long time (see the large cap growth bubble of the last decade for an example), but at least gives you an idea. I struggle to see how you do this with gold.

Scootersp said:

with bonds at 3% and inflation +7% the argument from some is that the longer inflation is persistent the more likely some money will find it's being put elsewhere where it 'might' make a real return?

That's typically the job of the growth assets in a portfolio - bonds are typically defensive assets.

Scootersp said:

long term bond performance isn't so terrible

You can see where it sits on the risk/return spectrum

[Scootersp]

I found that article and it makes a case for a part inclusion in a portfolio.

https://ofdollarsanddata.com/why-is-gold-valuable/

The graph you cannot argue with in respect to returns these are historic knowns, where it sits on the risk axis is far more subjective (i'm off to look up risk - standard deviation, is this just stating the higher volatility?) this must have been made on a set of assumptions or risk criteria as risk is not an absolute, and varies with time period etc? and so is much harder to define and compare?

[Derek Chevalier]

Scootersp said:

I found that article and it makes a case for a part inclusion in a portfolio.

Potentially, but we are debating the long term returns here. TBH I don't see gold featured in portfolios by people that have crunched the data - Betafolio etc

Scootersp said:

where it sits on the risk axis is far more subjective

This will be calculated using historic data - I'm not how it can be subjective.

[Scootersp]

Derek Chevalier said:

This will be calculated using historic data - I'm not how it can be subjective.

Quote of a definition, where it actually states it's one of many measures of Risk, that was my point ie Risk isn't a single definition (but you are right it isn't subjective when considering the standard deviation definition of risk)


'Standard deviation is a measure of the risk that an investment will fluctuate from its expected return. The smaller an investment's standard deviation, the less volatile it is. The larger the standard deviation, the more dispersed those returns are and thus the riskier the investment is.

Many technical indicators (such as Bollinger Bands) incorporate the notion of standard deviation as a way to determine whether to buy or sell a stock. It’s important, however, to remember that standard deviation is only one of many measures of risk and should not be the last word in deciding whether a stock is 'too risky' or 'not risky enough.'

[Derek Chevalier]

Scootersp said:

It’s important, however, to remember that standard deviation is only one of many measures of risk

Agreed on this. It's important to also remember the investor as well as the investment. A near 80% real drawdown over a 30 year period is going to be tough for many investors to stick with given the frequent desire to invest in "what is working now".

https://occaminvesting.co.uk/should-you-invest-in-...

[Scootersp]

On the same link there is a part where it looks at Gold's performance when there is a stock market drawdown of greater than 10%


"Gold looks like it does a pretty good job during a crash. It protected portfolios particularly well during the two most severe crashes in 2000 and 2008, posting positive returns during both. Gold’s return during the 2008 crash was particularly impressive, and would’ve made an excellent form of insurance.

Even during smaller drawdowns, gold fell less than the market, so would have provided at least some form of protection. In fact, gold fell less than stocks in every market selloff over 10% since 1975. In 6 out of 10 of the drawdowns, gold posted positive returns, and in the remaining 4 it fell less than the market.

While it’s not a perfect hedge (it doesn’t always go up when stocks go down), gold looks like it does perform reasonably well as crash insurance."


I don't think it's binary, good/bad or wise/foolish. The link has many good points, I still think that holding some is valid. If the above continues to hold true then perhaps it's worth holding the closer to retirement you get?