Reply With QuoteSo "the first £3k" were not the first £3k?Originally Posted by ryanb741
???
I'm confused but if you are querying the Gold holding I've been adding chunks at £3k every time I see a dip. Not that £3k is 15% of my Sipp
So "the first £3k" were not the first £3k?
Last edited by Raffe; 6th August 2020 at 08:48. Reason: I got mixed up
Someone who lies about the little things will lie about the big things too.
I meant the first chunk added to my original pile. You can see the questions I was asking 6 weeks ago about the merits of having Gold in the portfolio.
Agreed!
Here is perhaps a better illustration of just how the U.S. quarterly GDP "growth" rate is calculated, and you can see how flawed the method is in a situation like the 2Q of 2020.
The amounts shown in the chart are in "current dollars," meaning they must be adjusted using a "deflator" to achieve "real dollars," or constant value. Some of the numbers above may have changed slightly due to later corrections.
You'll note that the current dollar GDP for both the prior year (2Q19) and the prior quarter (1Q20) are very similar. As you can see by the very small quarter-to-quarter changes, the actual percent change from the year earlier was only -9.05%. However, the nominal decline from the prior quarter was a slightly larger -9.98%. Since that's the comparison they use, -9.98% gets 'annualized' and 'deflated' to arrive at a Real GDP Growth Rate of -32.9%.
Since we already saw that 2Q20 was only -9.05% below 2Q19, we know that -32.9% is ridiculous - - unless you believe succeeding quarters will continue to contract from prior quarters, which is really a different question.
Credit to you Ryan for calling out what you are doing. That is what this thread is about and some diversification makes sense.
Raffe, we get that you don't like gold and silver with a passion, but I have still not received an answer from you as to why central banks continue to hold gold if it is so worthless?
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Sounds like you went through the entire Madge journey.
Robert was spending a lot of time in France and now i believe he has set up a few other businesses that he manages.
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Is it not just down to perception? I always assumed so anyway.
Where did I say it's worthless? Last I looked it was worth about $2,000 an ounce.
I don't hate neither gold nor silver, my point is that it has no place being more than 5% in properly diversified portfolio. Believe me, diversification is the only free ride available in financial markets and owning too much of anything is the worst you can do when investing.
Central banks have a completely different frameset, they cannot hold most of the assets available to other investors as reserve (stocks, bonds, real estate, alternative assets). It's a monetary reserve, in which they are restricted to hold other currencies and precious metals. Why precious metals and not other assets, or cheesecake? All down to historical reasons when gold actually was money (pre 1971). Gold still has some properties which make it an interesting asset to diversify portfolios, much of that a carry-over from the days when it was money. In terms of crisis gold usually spikes up while all other assets spike down, for no other reason than that people expect it to behave like this (conventional wisdom). We see this as work right now.
The only central banks globally with a buying programme for gold are Russia, Turkey, Kazakhstan, Poland, China, India, Mongolia, Hungary, Uzbekistan and Azerbaijan. Despite of its buying, China holds less than 3% of its reserves in gold.
Difficult to keep track of what you are saying as you keep contradicting yourself, often from one day to another and then again the next day.
Pay attention at the back of the class. You are getting mixed up. That quote was from me. Ryan quoted my post and you them mistook that quote for him.
Nope, it was a quote from the post which also contained the Reddit stuff, deleted in the meantime. I quoted the post in its entirety here.
Last edited by Raffe; 6th August 2020 at 08:46. Reason: corrected my mistake
Really interesting and I get what you are saying about spreading investments over different sectors, makes a lot of sense.
Gold always has been a safe haven, with prices shooting up recently could this be a sign the big investors are moving out of stocks and into gold for fear of reality hitting the markets?
He never said it. See post #2716.
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My post, not Ryan’s
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The really big investors (pension funds and life insurance) are rarely doing much asset allocation and will definitely not buy large quantities of gold. They are very constrained in what they can and cannot buy and gold is not usually within their mandate. The typical clientele who are allocating to gold in these kinds of situations are private investors, usually allocating from riskier asets such as equities. This times it seems to be a bit different in that private/retail investors are buying stocks and gold at the same time.
I think it's just as much driven by herd mentality and message boards/youtube as the rest of what's happening. Robinhood rulez.
Oops, you are correct. No idea how this got conflated in my quote, my apologies and will correct.
Just an observation, but since '71, end of the gold standard, money is a perception too, relentlessly printing more of it 'dilutes' it.
Last edited by Passenger; 6th August 2020 at 08:51.
While we’re on the topic of gold, I am no fan. I have no use for it and it generates no income.
But I’ve put in two lumps of £3k into an ETF in the last week which are ticking along quite nicely. Generated more return in a week than a savings account in 5 years.
Why? Because the Fed is printing money. I don’t see gold going down any time soon. So, I think the downside is low. But, I think the upside could be large.
I am purely speculating (read that as gambling) on gold price going up given the economic climate - China tensions, money printing, fiat monetary system debasing.
This is money I can afford to lose and I am comfortable with my gamble. It beats the dogs and nags.
EDIT - in the last financial crisis gold more than doubled in Sterling value. In this crisis it is only up 25% Sterling. I think it has a long way to go.
Last edited by noTAGlove; 6th August 2020 at 08:58.
We will never sort that one out as it becomes ideological, but why is money a perception? It is an IOU by your friendly government rather than being backed by gold, that's right. But it worked pretty flawless, haven't heard of a developed government not honouring their obligations since the gold standard was abolished.
I can see gold at 5k per ounce by mid decade.
'friendly Government' Raffe, chuckle, after 2007/8 the ability to earn a small but steady return, more or less risk free on your/our money, just went away.
As you say there ain't no working it out.
Last edited by Passenger; 6th August 2020 at 08:57.
Understood, so to quote your term Robinhood rulez, do you still think private amateur investors are continuing to prop up markets with their unspent CV savings? If so then a further crash could well be on the horizon but to what level and when..
Sitting on cash and waiting it out is definitely the sensible option and one I should move too..
I’m automatically nervous in investing in an asset when it’s at an all time high, unless there is asset / security specific rationale.
Cyclicality is fine, but not in irrational markets, we get a vaccine in Q4 the drop could be fast and deep in gold and silver, basically the reversal of what we are witnessing
Good luck to you all though, will watch with interest
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You cannot use a one-week hindsight observation to argue the benefit of an investment. With the same argument you could also say that investing in Nikola has merits, returned 15% in one week (with strong outliers outside of that), has a market cap of $13 bln and a quarterly revenue of $36k. Cool.
Why not 15k or 25k? The problem with gold is that there is no way of valuing it, any valuation would try to determine its net present value by means of discounting the value of future cash flows. The reason is that any holder has the possibility not to sell it but hold it and reap these cash flows (like dividends with a stock or interest payments with a bond). As gold has none of these, it will be worth what the next investor is willing to pay for it, which may continue to go up but might just as well collapse from one day to another. It is purely speculative, not driven by any fundamentals and may work for you or not.
Low value = stable financial system and good world order
High value = money printing, world tensions, stagflation etc.
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I'm contrary - I sold my shares in Polymetal and Centamin a few weeks ago - clearly too early
Gold is a de facto global currency that cant be debased.
There is no global bank or government defining or guaranteeing that currency just confidence.
Given gold has held that role since the beginning of history I don’t see any reason why that would stop although some would say Bitcoin is looking to replace it.
Apart from some minor industrial uses gold has no value other than what the next person is willing to pay.
I think the interest is gold now is mainly driven by the fear of inflation as central banks are printing vast quantities of fiat money.
5% of my wealth is in gold and that seems reasonable and over recent times it’s been a welcome performer and I don’t plan on selling it.
Erm are the markets themselves now not thoroughly disconnected from the fundamentals, it's purely speculation...Wall St /Main st have decoupled and it's print or die...Nowt wrong with holding a bit of the shiny stuff in such circumstances.
Last edited by Passenger; 6th August 2020 at 09:20.
Gold was the global currency until 1971, it isn't anymore. I am willing to bet that Bitcoin will never replace anything and will eventually go to zero.
I am with you on the rest of your post, including that a 5% allocation to gold in your portfolio is beneficial and has proven to make portfolios more stable.
If you look at the last financial crisis gold dropped like a stone when financial stability returned.
I’m planning on holding gold until financial stability returns and then sell it. This may be years away.
They are disconnected at the moment, however history has shown that they will eventually return to reflect the fundamentals.
I am not saying that gold serves no utility in a diversified portfolio, my point is that expectations about a rise in value have no fundamental base.
With all respect, I believe you are a perma-bear. That is not meant to be a criticism, and I am the same.
I thought the markets would collapse going forward from April. It may still happen, but I was wrong
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You're talking about bitcoin, right?
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And I was basing my, admittedly inexpert gold price prediction, on that continuing disconnection, continued money printing as there is nowhere/nothing else for CB's to do, and economic pain still to come. Maybe it will be 10 k per Ounce.
Why have interest rates not returned to something, anything like historical norms, been what nearly a dozen years now, doesn't this demonstrate that the old fundamentals cannot be relied upon as we may have entered a new chapter in the history of financial engineering/ fiddling, just a thought.
I understand the gold standard is a thing of the past but I believe it is a de facto currency driven or defined purely by history and confidence.
Any currency relies on confidence, just because there is no global central bank or government defining gold as a currency I think it holds that position purely from its historical place and global understanding of the role and confidence in that.
The fact it is physical and cannot be debased combined with its history makes it a unique asset and the current interest in it tells me that position will likely hold for many years to come.
That doesn’t make sense, you are going to wait until it drop like a stone and then sell?
If you are a gold trader I’d recommend you sell it when it’s high ...
Not at all, I made most of my money being long. But I have learned to be critical when stuff appears to be going to the moon without fundamental reasons, because it won't.
You may very well be correct that gold will go up, it only requires more people believing that than the opposite for it to become true. My point is that there is no way to value gold, so any forecast is nothing but guesswork. That applies to bullish as well as bearish views, it simply is - as you and others have stated - worth what others think it may be worth. The difference to other assets being that if you don't agree with the market's assessment of the price of an asset, you can just buy it and keep it for its cash flows. That won't work for gold.
I also agree with most of what you say: the confidence in gold is there mainly because of historic reasons. I think there is less and less fundamental reason for it, because nobody will guarantee you that they will exchange your gold back into money any more than they will do for your Rolex or your Picasso. Still, people are buying Rolex and Picassos with a lot of confidence as well. I will be surprised if that confidence disappears overnight (and I am pretty sure that Rolex prices will crash before that ever happens). That doesn't mean that today's price is anything but a snapshot based on today's mood in the community.
When I can see in the distance that financial stability appears to be returning to normality, I plan to sell.
Last edited by noTAGlove; 6th August 2020 at 10:11.
This ^^^
You could argue that even 5% is pushing it and around 3% is more appropriate as part of a good spread of assets. I remember well the last time gold so called boomed and everyone was jumping on the bandwagon. People were saying it would go to $3,000, maybe $4,0000, safe haven, uncertain times etc etc. By then and like with most things, the rise has already happened and most getting on that bandwagon caught a cold.
People genuinely just don’t understand risk. I’ve been talking about it for 27 years with clients and friends. Everyone has different understanding of it and different levels that they can stomach. Capacity for loss is just as important. One very simple, almost stupid way of explaining it is giving people 3 options - what growth would you like? A 3%, B 7% or C 25%. Obviously everyone based on that limited information picks C.
You then say okay, if it can grow at those rates, you have to accept that it could also fall at those rates. So your 100k invested in C, might be 125k next year, but it could be 75k next year! Can you live with that? . . . . . Ah right, okay, ummm, oh, err I can’t take that gamble, I can’t afford to lose it as it’s my (fill in the box - nest egg, pension, mortgage vehicle, retirement villa, car etc).
I hope everyone does well here but if gold is $2,000 and you’re hoping it will rise 50%, be prepared for it to fall 50% - unlikely in these times I realise but you need to invest based on the possible outcome and understanding.
https://www.bbc.co.uk/news/business-53675467
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Yep the economy is only shrinking 9.5% this year
Makes a lot of sense and very well explained, I now need to ask myself some questions
Totally agree if the portfolio is your pension and wealth.
I have a comfortable final salary pension I have not yet started taking. I’m in the fortunate position of not worrying about a portfolio.
I want to gamble and take risks with spare money as I like the challenge and the buzz.
Thanks for the clarification.
I would take a stronger view that the historic use of gold (and silver) as money for most of the last two millennia shows a proven capability for it to act as money or a store of wealth.
Our recent 50 year binge on printing more and more fiat currency is spiralling and people are waking up to that fact and seeking alternatives.
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Have you considered black jack? It’s great fun.
I’ll stick to losing money on the stock market. I have a natural talent for it.
In order for a commodity to seve as money, it needs two properties: scarcity and endorsement by governments.
Gold did pretty well in terms of scarcity as mankind really struggled to dig it out of the ground for most of the time. I once read that we are currently excavating about 3,000 times as much gold as during the medevial ages, which probably compares about right with the amount of people on the planet with access to physical possessions (excluding peasants and serfs). The only period where supply exploded was when the Spanish raided the gold and silver of the Incas and Mayans, immediately resulting in 200 years of hyperinflation across Europe.
The other things is the endorsement, since 1971 that one is missing and gold is money no more. It may still have some similar properties (relative stability and rather wide acceptance as a thing of value), though you would struggle to barter any goods against gold as it is far removed from people's every-day affairs.
So, history is just history and no matter how much the gold bugs are preaching: gold is no money and will likely never again become money.
You can science it all you want and I am happy to have it as the functionality of a door stop.
A useful doorstop since it has risen 35% against the USD this year, and it has ticked up another 1%+today.
I’m buying more once it adds another 4%, as my recent earlier purchases will cushion any fall, which is I believe unlikely to be drastic in the near term
I would also use it as a bookend if it wasn’t locked up by Blackrock in an underground vault somewhere.
Have fun!
Someone who lies about the little things will lie about the big things too.
Maybe the US dollar just lost 35% of its purchasing power? It is said that gold does not appreciate or depreciate, only the currencies it’s priced in do that. (Physical holder since $1100)
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