What is the attraction of gold as an investment?

[candy]

In the case of a zombie apocalypse, I would think a case of Spam or Campbell's Soup would be much more useful than a brick of gold... but what do I know?

There are companies that sell "survival" food packages. I thought the ones I read about were highly overpriced.

 

[candy]

Why don't you read the original post? I posited that gold is not native to earth and therefore in a limited supply which cannot be replaced except at extreme cost.
As exchemist observed, capital investment in gold stock is not a winning strategy. Investment in gold bullion is an excellent long term strategy, due to is suitability for specialized nano-scale technology.

I would favor gold mining stocks over other trading vehicles as an investment.
If you want the "zombie" survival storehouse you should be buying new issues of coins. Some of them are very pretty. You might want to include some silver coins. It also has some special qualities and is more affordable for the beginner.

 

[sculptor]

...
If you bought gold at its peak in the early 1980's, now, 40 years later, you would still be losing money.

um
no
(unless you index for inflation)
gold hit a high of @ 850 dollars us in 1980
last year, gold traded @ 2070 dollars us

so
If you bought gold in 1980 you would have been up over 140% in 2020
however
If you'd have bought DOW stocks in 1980, you'd have been up over 400%

gold is a commodity
trade it as such

 

[Seattle]

I don't know what chart I was looking at but you're right. However, if you bought at the peak in 1980 you wouldn't hit that price again for 25 years.

 

[billvon]

How does putting 5% of your portfolio in gold stocks do anything?

It diversifies it.

Historically gold has done better than savings accounts, worse than investing in the stock market. It often does NOT follow the market, because people often panic buy and drive its price up when geopolitical unrest makes the markets shaky. Thus it is a good hedge against the market tanking.

Often investors will hold a pretty diverse bunch of stock as a buffer against catastrophe. I have a small percentage (about 15%) of my money in tax free state bonds. These perform abysmally (about 3%) which barely keeps pace with inflation. But when the market tanks they won't - and thus reduce the total risk of the investment slightly.

 

[sculptor]

I don't know what chart I was looking at but you're right. However, if you bought at the peak in 1980 you wouldn't hit that price again for 25 years.

yeh
I saw a chart that was indexed for inflation, and it agreed with your previous post.

 

[sculptor]

There are companies that sell "survival" food packages. I thought the ones I read about were highly overpriced.

If you shop around, MREs can be had for a little over a dollar a serving---caveat--low calorie (1280?)
longest shelf life if stored in cool to cold location
and
you're gonna need water and fire

 

[Seattle]

It diversifies it.

Historically gold has done better than savings accounts, worse than investing in the stock market. It often does NOT follow the market, because people often panic buy and drive its price up when geopolitical unrest makes the markets shaky. Thus it is a good hedge against the market tanking.

Often investors will hold a pretty diverse bunch of stock as a buffer against catastrophe. I have a small percentage (about 15%) of my money in tax free state bonds. These perform abysmally (about 3%) which barely keeps pace with inflation. But when the market tanks they won't - and thus reduce the total risk of the investment slightly.

Covered calls does a much better job IMO.

 

[billvon]

Covered calls does a much better job IMO.

Agreed. It's just one of many ways people diversify; some better than others.

 

[Seattle]

Agreed. It's just one of many ways people diversify; some better than others.

In times of low inflation cash isn't a bad way for shorter periods of time. You might earn a little interest in a money market but a smaller amount of cash can substitute for a larger portion (of lower yields) in bonds. The advantage being that if things turn down you either have cash for unexpected needs or you have money to invest in the market at now lower prices and you didn't have to tie up as much capital in bonds.

I just can't bring myself to look at bonds considering the all time low rates that we are at. It can only go up and with bonds yield and interest rate are inversely related. When I was in grad school in 1980 (and broke) interest rates were at all time highs and have only come down since there.

That would have been a great time to invest in bonds but of course as a student I was broke.

 

[Write4U]

To pay for the large costs of ongoing borrowing.
IMO, it is not so much a matter that the value of gold increases as the fact that the value of money is subject to inflation.

Case in point was the value of the German mark just prior to WWII

Hyperinflation in the Weimar Republic

First World War, Germany suspended the gold standard (the convertibility of its currency to gold) when the war broke out. Unlike France, which imposed its first income tax to pay for the war, German Emperor Wilhelm II and the Reichstag decided unanimously to fund the war entirely by borrowing.

The government believed that it would be able to pay off the debt by winning the war and imposing war reparations on the defeated Allies. This was to be done by annexing resource-rich industrial territory in the west and east and imposing cash payments to Germany, similar to the

French indemnity that followed German victory over France in 1870.[1] Thus, the exchange rate of the mark against the US dollar steadily devalued from 4.2 to 7.9 marks per dollar, a preliminary warning to the extreme postwar inflation.[2]

A 5 Million Mark coin,

Weimar Republic hyperinflation from one to a trillion paper marks per gold mark; values on logarithmic scale.

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic

--------------------------
How Inflation Affects Gold Price

The Causes Of Global Inflation

According to Wikipedia – “inflation is a sustained increase in the general price level of goods and services in an economy over a period of time”. Inflation — or, to put it differently, devaluation — of world currencies is a popular issue for a long time. When the USA left the Gold Standard the risks with interest rates staying low for so long the threat of money inflation has grown hugely.

What just causes inflation? How inflation affects gold price? This short article will answer those questions.

There are just two primary reasons for inflation. This kind of inflation causes the dollar to reduce value because of the truth that so that they pass those costs onto consumers. Therefore, firms must cover more for matters and make products more costly.

The next kind of inflation is called “demand-pull inflation”. Demand-pull inflation occurs when producers get to the largest possible amount of production of products and services in spite of demand that is bursting.

Why Gold Price Goes Up?

We have already written about the advantages of gold as an investment and no doubt it's great protection against inflation. Inflation comes with an enormous influence on gold prices. The initial effect must do with inflation is that it lowers the worth of each other dollar in circulation when creating more fiat currency.

Gold along with other commodities which are priced worldwide in US dollars mechanically cost more. That's because you’ll need more of the recently devalued dollars to choose the same number of gold. (whose built-in worth hasn’t transformed in tens of thousands of years).

https://infoforinvestors.com/investing/gold/how-inflation-affects-gold-price/#

 

[Write4U]

Gold’s Impact on Modern Life
Posted on February 19, 2014 by Minerals Make Life

Gold is one of the world’s most sought-after minerals, prized for its value and unique qualities. Most frequently associated with jewelry, many people are not aware of its versatility and contributions to daily life. From the fastest technology to the most sophisticated medical equipment, gold is a vital resource. Without gold, our GPS and satellite technology could not navigate as quickly, our astronauts would not have adequate protection from harmful radiation and our doctors would not have the technology behind life-supporting medical equipment.

.........more

https://mineralsmakelife.org/blog/golds-impact-on-modern-life/#

 

[ThazzarBaal]

I've never gotten the attraction of gold as an investment. Long term it's been a terrible investment. It's supposed to be an inflation hedge but it's not really been good in that regard. It's a commodity but so is corn.

Sometimes you will hear people say a well diversified portfolio should have 5% to 10% gold...why? Even if it happened to go up when stocks were going down...how is 5% really going to make much difference?

If you just want to have something go up when stocks are going down just buy stocks that pay dividends and then you'll still have dividends while the stock is lower.

I think people just like to look at it.

Any other viewpoints out there? What am I missing?

It feels great in the hands and it's shiny. I like it, but I also like 1 dollar coins, which I'm finding difficult to obtain at cost. The markups tend to make purchasing gold less attractive. The same is true for regular 1 dollar coins. I hate cryptocurrency and while counterfeiters continue to find ways to replicate, the prospect of gold in hand seems valid, if not promising, but like I stated - the markups null and void any real interest on my part, so it feels great in the hand and it's shiny.

 

[Write4U]

Gold is a rare metal that is not native to earth and due to its purity and utility in electronics it will always be in demand for use in electronic equipment.

Gold: Facts, history and uses of the most malleable chemical element
By Stephanie Pappas, published March 03, 2022

Gold is the 79th element on the Periodic Table of the Elements

Gold represents a tiny fraction of the elements in the known universe. The reason for its rarity is owed to the incomprehensible amount of energy needed for its formation. Gold is formed in stars, but only in those that are exploding in giant supernovas(opens in new tab), or incredibly dense ones that have come together in monstrously powerful collisions, according to the journal PNAS(opens in new tab) .

Stars, such as our sun, generate energy through the power of fusion, where smaller elements are fused, or combined, together into heavier elements. To start with, a star may be mostly hydrogen, the smallest element. The process of fusion under immense pressure and heat in the star's core will generate helium. When hydrogen runs low and the star begins to reach the next phase of its life cycle, it will fuse helium into the next heavier element, and so on.

This process continues until the element of iron, where the balance suddenly shifts. Because fusing iron does not create energy, it consumes it, according to the University of Oregon(opens in new tab). With no means of generating internal energy to counteract its own immense pressure and gravity, the star begins to collapse onto itself. If the star is large enough the result is a supernova — a massive star explosion, according to NASA(opens in new tab). Heavier elements are formed during the incredible energy generated during this process, including gold.

https://www.livescience.com/39187-facts-about-gold.html