precious metals

[scotchnrocks]

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We may very well be entering into one of those rare investment periods for gold.

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I think that bus has already left.

Though the historical returns may be low, it seems around the year 2000 it was an obvious buy trading at a 20-year low in the high 200's/ounce.

[gull]

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So what is? TIPS? Soybeans?

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Commodity futures funds. You get stock-like returns that are correlated with inflation and slightly negatively correlated with stocks.

http://altruistfa.com/readingroomart...tm#Commodities


[ QUOTE ]
it seems around the year 2000 it was an obvious buy trading at a 20-year low in the high 200's/ounce.

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I heartily disagree with this statement for a number of reasons.

1)What is special about 20 years? That is, what made this logic applicable at 20 years but not 10 years?

2)If it was obvious, why didn't intelligent investors immedietely invest in it, boosting the price up to its "real" value?

3)Why can you discount the history of gold prices?

[scotchnrocks]

I'm just throwing an opinion out there and I'm not well heeled on all the aspects of investing.

I don't think anything was particularly special about 20 years. But it was trading at about 15% to 20% lower in 2000 than the rough average of the previous 15 years. And even though it doesn't back our currency anymore, it was undervalued inflation wise, in my opinion. Gold is timeless and it's uses for jewelry and other high end decorations will never go out of style and it will always be useful as a universal currency and is resilient to a weakening dollar. It's supply is also limited and it cannot be created out of thin air like our fiat currency.

When the economy is unsteady (tech bubble in 2000) and there is a lot of fear, gold seems like a sensible thing to have, especially with the valley it was in. And then after 9/11 things got even worse.

I don't know why intelligent investors did not buy up gold. Maybe because it's true value is more difficult to evaluate than stocks and real estate because of it simply being a piece of metal?

Like I said I'm not expert on this subject. Maybe you can explain why it was still not an obvious buy at the time in the early 2000's and why it may run even higher in the near future.

EDIT: I'm not formulating my opinion now based on how things happened. I was thinking the same thing then based on discussions with my college economics study group in the fall of 2001.

[scotchnrocks]

Gull,

I would like to hear why you heartily disagree with my comments. I explained myself so please do me the courtesy.

[gull]

Sorry. I listed the three reasons I doubted the "obviousness" of the buy. I'm not a gold trader either, but I don't see why it was an obvious buy. It seems like hindsight to me. For example, you say how it was in a valley. Before the future occured, it was on a downhill slope with no end in sight. Years before its price increased, it was on the same downhill slope. If you had bought then, you would have experienced 5 years of losses. I don't see how the logic you presented above is unique to 2000 and not, say, 1995.

[gonebroke]

There are several reasons to buy gold and silver bullion and stocks. Hedge against inflation, upcoming currency crisis, etc. But one of the main reasons to invest right now is because they are currently in a bull market. The trend is your friend and precious metals are currently in a bull market. Until I see a reversal of the trend, I will continue to invest in that sector. That also includes Uranium which is in a huge bull market.

Bull Market has 3 main phases.
Stealth Phase - Where prices go up and nobody knows about it. Gold went from 250 to 400+ without anyone knowing or following it.

Wall of Worry Phase - People are worried that gold will go back down and are too scared to jump in. That is the current phase we are in now.

Mania Phase - This is the phase I am waiting for and will unload all my positions. This is when all the fish/herd jump in and start panic buying because they feel they are missing the ride.

[gull]

Hm. So one poster recommends fighting the trend, buying when gold is going down. Another poster recommends following the trend, buying when gold is going up.

Again, I must repeat. Commodity futures funds are a hands-down better way to hedge against inflation.

[tripper]

Gold outperformed the CRB in the last bull market.

[scotchnrocks]

Gull,

Appreciate the response. As I mentioned, my study group in college was looking at it in ~2000 so I guess you could only say it's hindsight in that I wouldn't have said anything if it wasn't on a tear lately.

Also the logic could also be applied back to 1995. If something is undervalued, it is best to buy as much as possible while it is low and even while losing to still buy more because the price is still right. Would it have really been sensible for gold (the quintessential global currency) to continue going down when it was already @ $280/oz, roughly the same spot it was in in ~1978 not even inflation adjusted?

[gonebroke]

The dollar is crashing. It is below the crucial 85 mark on the US Dollar Index. Watch out below!!! Anticipate gold and silver breaking 52 week highs early next year.