Buying Gold / Silver / Precious Metals

[Tater10]

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As I said:

"Gold/Precious Metals are only appropriate in small quantity as a diversifier(if at all)"

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Yes, I am agreeing with you.

Asset A returns ~10% per year
Asset B returns ~4% per year

Which does one invest in? The answer isn't just "ZOMG, 100% A"

One needs to analyze the correlations, risks, and personal ability to accept these risks in order to make a decision.

[kimchi]

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Adding non-correlated assets to a portfolio can decrease the risk/return ratio. There is a greater than a 0% chance that we will wake up one day with Dow index value BELOW the $ value of gold . You don't have to predict prices of stocks or gold, just prepare.

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The Dow/gold ratio returned to around 1 to 1 after the bull market peaks of 1929 and the late 60s. Why shouldn't it occur again after the 2000 ratio peak?

After (was it Nixon) the gold standard was dropped in the early 70s, gold rose from around $40 to over $800 by 1980.

That was a 2000% increase.

Spot gold has risen from around $250 in 2000 to around $700 now. That's less than a 300% increase.

I think gold has more upside.

As for physically buying gold, there's a possiblity gold will be illegal to possess in The USA in the future (except for industrial purposes), and can be repossed by the government.

You can hold certificates of deposit in gold from a more politically stable country such as Australia, where a lot of gold is mined. The Perth Mint of Western Australia is not a bank (and I know how much The US government likes to know about its citizens' personal finances) and so you don't need to declare your holdings.

Buying gold mining companies offers some leverage on the price of the commodity they mine. This leverage is limited by the rising inflationary costs of mining it, which is usually the economic backdrop during periods in which the price of gold increases.

[gull]

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Regarding the chart:

A $10,000 investment: your returns with gold and stocks

Had you invested $10,000 in gold bullion in 1999, your initial investment would have grown to $22,205 by 06/30/06 – a 122% percent increase.

That same $10,000 investment in stocks of the S & P index would have netted $10,162. That’s a 1.162% increase.


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Again, that statement is <u>factually incorrect</u>. You are forgetting to include dividends in your calculations of stock returns.

[gull]

Historically....

Gold is a horrible diversifier, becuase you can cut risk more efficiently by moving to bonds/cffs/t-bills.

Commodities do not provide efficent diversification, and they hurt returns. Commodity futures funds, on the other hand, are great diversifiers and have stock-like returns.

[The4Aces]

I would recomend putting 10% gold/silver/plat/whatever metal in your portfolio. I would recomend taking physical shipment of the bars and not telling anyone.

The reason is for a total [censored] hits the fan scenario. I belive gold ect will still be valueable.

[gull]

If society collapses, why will gold be valuable? Or more at least more valuable than weapons, canned food, technology?

[The4Aces]

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If society collapses, why will gold be valuable? Or more at least more valuable than weapons, canned food, technology?

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why has gold been valuable for millinium? it is a store of wealth the other people recognize.

[gull]

I would not be trading food/technology/weapons for a yellow brick after society collapses. Gold, it seems to me, lacks the inherent values of other storable goods.

[john kane]

this is a really interesting discussion.

the main reason i am wanting to invest heavily in gold is because i think the us economy is more likely to weaken than strengthen. given this will hopefully have a positive effect on the dollar.

also in general i have been trying to invest in companies nobody is predicting a crash, yet some people are predicting a boom. when i bought my gaming shares, i read up on what people were saying the weeks beforehand and some were still saying it could go lower. i bought when the significant majority were saying buy. this meant i bought party at 27p the lowest it ever hit. yes, i know very lucky, for sportingbet i bought at 44p and it went down to 35p or so, but still, its up over 55p now.

anyways, its been the same for uranium and gold. nobody i can find is predicting a crash, yet some people are predicting a continued surge.

you can find countless reports in 2006 onwards of uranium by googling and the overwhelming majority say to invest. maybe thats just becuase they get more hits than the doomsdayer ones, or becuase most sites are promoting people to invest.

but the same applies to gold (and even more silver i'd say) that people are saying to buy.

ask me technical reasons why i should buy? i can't. but i don't feel i need to. so long as i keep up to date by reading reports etc, i feel that keeps me in touch.

gull, i read something recently how people in the 19x0s (x = 6-8, cant remember) were queueing for numerous hours to buy gold coins as they felt that was the only safe purchase to make.

i dont think we need society to 'collapse' in order for gold to surge, we just need a bear market run.

[BradleyT]

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If society collapses, why will gold be valuable? Or more at least more valuable than weapons, canned food, technology?

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Other countries will always love gold but they may not always love the U.S. Dollar.