Is gold a bad investment?
- Thread starter Seraphim
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Original_Intent
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Pretty funny, I was going to respond the same way as the article. It's not an investment, it's having real money vs. play money.
Travlyr
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I think it was Peter Schiff who said that people holding real money are experiencing deflation while people holding FRNs are experiencing inflation. And it's true. I carry a Peace Dollar with me at all times as a reminder of that fact. A breakfast for four at a diner ... about one dollar. A tank of diesel for my truck ... about two and a half dollars. I don't spend the silver dollar because these merchants will still take the paper/electronic things, but it is nice to enjoy price deflation. 
Zippyjuan
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From the article:
If gold keeps its purchasing power, then adjusting its price for inflation should show either a flat or increasing price over time. That has not always been the case.
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm
As you can see from this chart, the purchasing power of gold was the same in 2001 as it was in 1972. Adjusting for inflation, the 2005 price was the same as in 1977. It's purchasing power fell from 1980 through 2001- a period of 20 years. From 1997 through 2005, it was worth less than every year since 1973. If the Fed starts to raise interest rates, it will probably fall again (though I don't see the Fed raising rates for a while). Like anything it has its ups and downs. From 1971 to 1980, it went up. From 1980 to 2001 it went down. Now it is up and will probably go down again too. Any "security" of value is not guaranteed. Like any investment, one is placing a bet that in the future somebody will be willing to pay more for it than they are willing to pay for it now.
If gold keeps its purchasing power, then adjusting its price for inflation should show either a flat or increasing price over time. That has not always been the case.
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm
As you can see from this chart, the purchasing power of gold was the same in 2001 as it was in 1972. Adjusting for inflation, the 2005 price was the same as in 1977. It's purchasing power fell from 1980 through 2001- a period of 20 years. From 1997 through 2005, it was worth less than every year since 1973. If the Fed starts to raise interest rates, it will probably fall again (though I don't see the Fed raising rates for a while). Like anything it has its ups and downs. From 1971 to 1980, it went up. From 1980 to 2001 it went down. Now it is up and will probably go down again too. Any "security" of value is not guaranteed. Like any investment, one is placing a bet that in the future somebody will be willing to pay more for it than they are willing to pay for it now.
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Acala
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Or Belarus . . . right now.
Jordan
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From the article:
If gold keeps its purchasing power, then adjusting its price for inflation should show either a flat or increasing price over time. That has not always been the case.
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm
As you can see from this chart, the purchasing power of gold was the same in 2001 as it was in 1972. Adjusting for inflation, the 2005 price was the same as in 1977. It's purchasing power fell from 1980 through 2001- a period of 20 years. From 1997 through 2005, it was worth less than every year since 1973. If the Fed starts to raise interest rates, it will probably fall again (though I don't see the Fed raising rates for a while). Like anything it has its ups and downs. From 1971 to 1980, it went up. From 1980 to 2001 it went down. Now it is up and will probably go down again too. Any "security" of value is not guaranteed. Like any investment, one is placing a bet that in the future somebody will be willing to pay more for it than they are willing to pay for it now.
Gold investors live forever, haven't you heard? Volatility doesn't matter!
hugolp
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The problem with this meme is that if you follow it you should not buy anything. Things go up and down. You want to buy them when they are down and seel them when they are reaching the peak (this is obviously easier said than done). Therefore when someone talks about buying gold is because he/she thinks its a good buy at this moment, not because he/she thinks it will go up forever, as the meme implies.
Zippyjuan
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You are right. And as you point out, it is impossible to know when a peak has happened until after it has passed. Metals have had a pretty significant run-up in prices which makes me wonder for how much longer that can continue. That makes me cautious about the potential for future gains. I was wondering how much longer housing prices could continue to rise as well- feeling that they were getting over priced- and they continued to do so for another about three years. I was lucky enough to get in early and even today my home is still worth about twice what I paid for it- even after the fall in prices over the last couple years. I was just trying to point out to some who seem to think that gold and silver will rise seemingly forever that it won't.
archangel689
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It'll rise until the forces that are causing it to rise, stop.
Teaser Rate
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It's rather hard to predict when speculative bubbles will burst.
Kregisen
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I don't understand why people are saying gold is money or not....money is an investment in itself. You can invest in FRN's, gold, walruses, etc. The point is, everything can go up in value or down in value relative to everything else.
From the statistics I've seen, long-term gold is not a very good investment. It can shoot up in some periods and drop in others, but overall, if I remember correctly, it's only been going up 3% a year for the last 4-5 decades. But if you want to invest in it, go invest in it. It's better than investing in FRNs.
From the statistics I've seen, long-term gold is not a very good investment. It can shoot up in some periods and drop in others, but overall, if I remember correctly, it's only been going up 3% a year for the last 4-5 decades. But if you want to invest in it, go invest in it. It's better than investing in FRNs.
Danke
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LOL. No it isn't. Price it in real money like gold and silver.
Teaser Rate
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Not all investment requires speculation. e.g. Investing in a 4 year college education is much different than buying a house with the hopes that its relative value will appreciate over time.
Zippyjuan
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It is not a valid comparison. The price of gold and silver have been inflated lately. And not just in comparison to the dollar. Even after adjusting for price inflation, both metals and my home are higher than when I made my purchase so both are worth more. Ten years ago we had the opposite situation with the price of metals falling and the price of houses going up.
But that is not what I bought a home for in the first place. It will save me money in the long run by locking in housing costs and when it is paid off (in a couple of years) will greatly reduce my cost of living. That is a real return on investment since it frees up money for other things. Compared to renting a comparable unit, I am already saving money.
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Danke
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Your dollar is worth a lot less. Look at the price of essentials like energy and food. PM have gone way up, much more than your home. You would have been better off to take out an equity loan and invest in PMs over that time frame. House would have been paid for already and you would still have PMs left over.
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Zippyjuan
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Taking out an equity loan to buy metals ten years ago would have been seen as a foolish thing to do- at that point, the price of metals had been declining for the previous 20 years. I doubt you would have considered such a move at that time either. "I think I will borrow $200k to buy gold with!" Would you be willing to do that even today? Taking out a loan to invest in anything is a highly risky proposition and not well advised. I don't regret purchasing a home at all. It was a very good move for me.
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