Gold - worthwhile in the current climate? (LTD Co)

[BorkBorkBork]

I don’t think a small % of your total portfolio is a bad bet, just in case we have a prolonged period of stagflation.

[TobyTR]

DonkeyApple said:

TobyTR said:

5,000+ years of inflation-beating history...

and tell the families during Weimar and Venezuela hyper-inflation that it's best left to dodgy salesmen etc... those that held physical Gold & Silver survived and prospered, while their currencies failed - just like they all do eventually. The US dollar has already lost 98% of its purchasing power.

History doesn't repeat itself but it often rhymes

Ah, so this is actually nothing at all to do with this thread just some random religious posts trying to convert non believers?

Where are the random religious posts? Please highlight in bold.

Seems you like to go off on tangents and don't know monetary history

[TobyTR]

DonkeyApple said:

Scootersp said:

I believe there is room for a happy medium! It's a very divisive topic, it tends to present with polar opposite views with slightly derogatory tags given.

There is only one reason I can think that central banks buy it and that's because one day they think they might need it? like a ancient security blanket? and these are the people that do make the financial rules and can change them?

The problem is that when there is an extreme view that view will always be at odds with more than one use of the material.

Ie, gold clearly has a value and clearly serves a purpose. Believing that in a specific situation it may not serve any sane purpose is not the same as believing it never serves any purpose.

So in this particular thread where an OP was looking at a specific scenario, stating that gold performs well over a 5000 year outlook compared to a major currency or that it can be an efficient means to cross borders rapidly in a violent geographical scenario are really all that relevant.

If the OP has asked what the best store of wealth might be for a zombie apocalypse or for a plan to live to be 5000 years old then they might be valid arguments.

The point being that just because gold may be a poor store of value in one scenario doesn't mean it's bad for another and vice versa, just because it's good for zombie holocausts or 5000 year investment horizons doesn't mean it's any good as an alternative for toilet paper.

For most people in a stable economy and with a typical lifespan, beyond sensible exposure as part of a broad portfolio or making phone calls, gold serves almost not purpose other than making old men less terrified of the world outside and for offloading ugly daughters.

you don't even have to use the 5,000 year excuse. Just look at times of currency debasement and huge inflation - which in the grand scheme of things isn't that long ago.

As I said, the average currency lifespan is 85 years and given what is happening in the world currently with failed keynsian economics anybody who dismisses Gold is a fool.

[TobyTR]

Scootersp said:

I get that for the OP the comments were way off on a tangent

DonkeyApple said:

For most people in a stable economy and with a typical lifespan, beyond sensible exposure as part of a broad portfolio

I think this is you saying it has a place as sensible (very low % I know) exposure....ie to have none could be considered more risky than to have a bit, regardless of any impending disasters.

The zombie apocalypse phraseology implies it's nuts to have any?

Article from 2017 so way before covid etc and the Germans are not known for their frivolousness? The backdrop for this being negative interest rates

https://www.usfunds.com/resource/germans-have-quie...

Yup, Germans know the importance of precious metals because Weimar. Unfortunately it's one of those things that if it hasn't affected you in the past then ignorance is bliss.

[Derek Chevalier]

Scootersp said:

I think this is you saying it has a place as sensible (very low % I know) exposure....ie to have none could be considered more risky than to have a bit, regardless of any impending disasters.

What would you exclude from the portfolio to find some space for gold?

[Scootersp]

Derek Chevalier said:

What would you exclude from the portfolio to find some space for gold?

Perhaps people could reduce something, no need to exclude anything you currently have if you don't want to is there?

[BorkBorkBork]

Derek Chevalier said:

Scootersp said:

I think this is you saying it has a place as sensible (very low % I know) exposure....ie to have none could be considered more risky than to have a bit, regardless of any impending disasters.

What would you exclude from the portfolio to find some space for gold?

Cash, if you are holding too much.

[Derek Chevalier]

BorkBorkBork said:

Derek Chevalier said:

Scootersp said:

I think this is you saying it has a place as sensible (very low % I know) exposure....ie to have none could be considered more risky than to have a bit, regardless of any impending disasters.

What would you exclude from the portfolio to find some space for gold?

Cash, if you are holding too much.

Typically portfolios will only have a small amount of cash so there won't be a meaningful amount to replace. And gold is obviously pretty volatile so not even close to a like-for-like replacement vs something like high quality, short duration bonds.

Scootersp said:

Derek Chevalier said:

What would you exclude from the portfolio to find some space for gold?

Perhaps people could reduce something, no need to exclude anything you currently have if you don't want to is there?

Yep, meant reduce.

Taking 5% of equities out of the growth pot and replacing with gold is likely to reduce overall returns (at least according to history)
Taking 5% of high-quality bonds and replacing with gold is likely to increase overall volatility.




Growth assets

Growth assets are included in a portfolio to generate inflation-beating returns, thereby reducing the chances of running out of money over a multi-decade retirement and helping to ensure portfolio sustainability.


Defensive assets

The two main jobs for defensive assets are to dampen portfolio volatility and minimise overall falls in total portfolio valuation.

[Scootersp]

May be it's a black swan/armageddon asset? I honestly don't know, but I know that all major central banks own it.

Swiss bank own(ed) many billions of US stocks apparently and Gold at the same time, so perhaps they are just old school or just feel better for having it, a hangover from when it was money that they can't let go?

Up to the individual if you want to do the same?

[BorkBorkBork]

Derek Chevalier said:

Typically portfolios will only have a small amount of cash so there won't be a meaningful amount to replace. And gold is obviously pretty volatile so not even close to a like-for-like replacement vs something like high quality, short duration bonds.

I’d rather have a small % of my overall portfolio in gold as an hedge against stagflation, rather than these so called ‘high quality’ bonds you speak of. We haven’t see stagflation in the UK for nearly 50 years and we are currently sleep walking into a similar situation.

[Scootersp]

For anyone interested these are some of the central banks responses to why they hold Gold

https://www.bullionstar.com/blogs/ronan-manly/worl...

[BorkBorkBork]

Scootersp said:

For anyone interested these are some of the central banks responses to why they hold Gold

https://www.bullionstar.com/blogs/ronan-manly/worl...

BoE: “The ultimate asset to hold in an emergency”

And given what we’ve been through in the last couple of years, and how we are inevitably lurching from one crisis to another without seemingly knowing what to do about it, Gold seems like a very sensible option as part of any diversified portfolio.

[Scootersp]

Indeed, some other major financial institutions.

IMF "Since early 2011, the gold holdings of the IMF have been constant at 2,815 tonnes"

European Central Bank 500 Tonnes

Bank for international settlements 100 Tonnes

[VR99]

We have gold in our family, primarily as it was culturally popular in my parents generation and before them. However, in the event of an apocalyptic event I can't see it helping me much if trying to flog the gold in exchange for tins of beans etc It's also extra faff in insuring and keeping it secure/avoiding unnecessary attention. I also stopped wearing gold many years back, my 'Mr T' blinged up days are firmly in the past and staying there

As an aside, I'm not the tin foil hat sort but always suspected that there are some funny shenanigans in the Physical and Futures gold markets on pricing.....no evidence to back that up so one shall not speak anymore about such spurious claims.

Edited by VR99 on Thursday 30th June 15:08

[BorkBorkBork]

VR99 said:

We have gold in our family, primarily as it was culturally popular in my parents generation and before them. However, in the event of an apocalyptic event I can't see it helping me much if trying to flog the gold in exchange for tins of beans etc It's also extra faff in insuring and keeping it secure/avoiding unnecessary attention. I also stopped wearing gold many years back, my 'Mr T' blinged up days are firmly in the past and staying there

As an aside, I'm not the tin foil hat sort but always suspected that there are some funny shenanigans in the Physical and Futures gold markets on pricing.....no evidence to back that up so one shall not speak anymore about such spurious claims.

Edited by VR99 on Thursday 30th June 15:08

An apocalypse and a crisis are very different things. In the event of the former, the only thing worth holding will be a gun and lots of ammunition. But gold is useful if markets crash, currencies are devalued significantly, in the event of stagflation, or prolonged high inflation and war. And all of those are not out of the question.

I’m not sure I’d advocate holding the physical asset yourself either. That’s asking for trouble. You can buy gold vaulted, and pay a small fee for storage. That’s the sensible option.

[Scootersp]

There also has been some actually successfully charged manipulation cases.

https://www.reuters.com/article/jp-morgan-spoofing...

Also some more theoretical stuff is proposed, more like the "London gold pool" suppression that was created and sustained by central bank collusion for years https://en.wikipedia.org/wiki/London_Gold_Pool

[Derek Chevalier]

BorkBorkBork said:

Derek Chevalier said:

Typically portfolios will only have a small amount of cash so there won't be a meaningful amount to replace. And gold is obviously pretty volatile so not even close to a like-for-like replacement vs something like high quality, short duration bonds.

I’d rather have a small % of my overall portfolio in gold as an hedge against stagflation, rather than these so called ‘high quality’ bonds you speak of. We haven’t see stagflation in the UK for nearly 50 years and we are currently sleep walking into a similar situation.

If it's only a small portion, how much of a genuine hedge will it be across the whole portfolio?

I'm still not clear how gold can replace bonds without ramping up overall volatiliy.

[Derek Chevalier]

BorkBorkBork said:

or prolonged high inflation

The evidence re inflation hedging is mixed

https://www.nber.org/system/files/working_papers/w...

"Over practical investment horizons, gold is an unreliable inflation hedge"

[BorkBorkBork]

Derek Chevalier said:

BorkBorkBork said:

or prolonged high inflation

The evidence re inflation hedging is mixed

https://www.nber.org/system/files/working_papers/w...

"Over practical investment horizons, gold is an unreliable inflation hedge"

I think this chart says it all from that report:



If you are looking 25 years ahead, I agree. Gold might not be the best place for your money. But if we’re looking 0-10 years, we’re long overdue a crash, and every indicator is suggesting a tough time ahead at the very least. I really don’t see any value in either equities or bonds in the short to medium term.

Yes, the price of gold has some volatility, but that’s no different to equities or any other commodity. And it’s undeniable that gold is seen as a safe haven in times of crisis. As I’ll reiterate, I see it as an hedge mainly against stagflation. We’re not there yet, but it depends if you think stagflation is less or more likely. Like all investments, there’s no certainty either way.

I think stagflation is more likely than not. The only missing element is high unemployment, but I suspect if we see a continuing of inflationary pressures on both businesses and consumers, then wholesale cost cutting and business insolvencies will naturally follow. We’re already seeing some business sectors, such as tech, shedding thousands of jobs. Time will tell.

[Scootersp]

Derek Chevalier said:

If it's only a small portion, how much of a genuine hedge will it be across the whole portfolio?

I'm still not clear how gold can replace bonds without ramping up overall volatility.

When it's surged in the past, mustn't it mean that people, funds etc rotate into it rebalance their portfolio? ie en masse those that have none or already have some buy into it more? Won't that be what happened post the covid shock when it initially dropped with everything and then reversed and breached $2000

So it gets momentum like the Tesla's etc did and becomes the thing to have, the thing to trade and/or ride the wave until it too gets into a bit of a bubble?

It's obvious to us all I think that it's not owned much, probably a huge decline in personal and fund holdings over the last few decades, but the ownership by the central banks is level or has grown.