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OfflinePsilosopherr
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Is gold a good investment?
    #26659934 - 05/09/20 12:29 PM (3 years, 8 months ago)

I remember our guidance counselor in highschool making it sound like gold was guaranteed to perpetually appreciate in value. Is this true? Or if thats not true is it generally a good investment?

Too busy to look into it so I thought I'd ask y'all


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InvisibleAhab McBathsalts
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Re: Is gold a good investment? [Re: Psilosopherr] * 2
    #26662339 - 05/10/20 12:38 PM (3 years, 8 months ago)

Historically like over the last 250 years or so gold has kept pace with inflation. So a one ounce gold coin would buy a a sheep or whatever pretty much throughout history.

Fiat currencies since their existence have always depreciated from inflation. A dollar in 1910 vs. A dollar today. And this has occurred since Roman Empire coins.

Now in the last 50 years or so gold has done about 7% a year. Pretty darn good compared to a stock market average of 11 or 12. But there are lots of periolperiods that it doesnt move at all or goes sharply lower. Like the 2012 to 2020 was an 8 year period of zero growth. And you aren't receiving dividends, there is no intrinsic value in it.

Generally speaking financial planners will give the rule of thumb that 5-10% of your assets should be in gold as a hedge and to smooth out returns. Gold isn't strongly correlated to realestate, stocks or bond. It moves independently on it's own cycle.

So gold is a good investment, but there are tons of people that bought at the peak in 2012 and got burned because they didn't have the right time horizon and expectations of return. Like if you are buying an gold ounce a year, every year you'll have a nice little stash in old age. I had about 40 ounce of paper gold worth up until recently because I felt the price was cheap, but have sold most of it off in strength.

It's a commodity. It's volatile in the short term and commodity traders regularly go bust because of unforeseen events. But gold is a valuable portion of a portfolio.


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OfflinePsilosopherr
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Re: Is gold a good investment? [Re: Ahab McBathsalts]
    #26662409 - 05/10/20 01:02 PM (3 years, 8 months ago)

I really appreciate the detailed response to my lazy question :grin:

The only thing that makes me nervous is that its currently only a bit less valuable than its peak value, but I suppose you already addressed that concern by saying its a good investment. Would you also call silver a good investment? Looking at the prices it hasn't recovered from the 2012 drop like gold has, but maybe that means its a good time to buy.

Any particular reason you went with paper gold? Would be kinda cool to have the actual gold in my possession but maybe its more theft-proof with the paper method?

Can you just buy it from banks or where would be reputable places to buy it?

I'm brand new to investing so this seems like an easier first step to me than stocks/bonds or anything like that. All I've ever done before was a little bitcoin. Only got like $10k anyway


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InvisibleAhab McBathsalts
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Re: Is gold a good investment? [Re: Psilosopherr] * 1
    #26662885 - 05/10/20 05:56 PM (3 years, 8 months ago)

Silver is about the same, but has more industrial uses, so it's somewhat more tied to the business cycle. I believe it has some uses in solar panels too, but haven't really read up on it.

Paper gold is better for me because you get spot price on buy and sell and there is no storage cost and I can sell it anytime. If you bring in scrap or bullion to a dealer you'll always pay a premium to buy and get less than spot when you sell. The downside is that if shit hits the fan, or the institution that wrote the paper gold notes goes insolvent you are out of luck.

I usually buy mnt.to. It's Royal Canadian Mint. I'd think it's be mostly backed by the government, but it's an exchange traded note. So it's only covered by futures contracts. There is no physical gold supporting it. If you have 10,000 units, about 200,000 dollars worth you can take delivery for a 5% fee and they will ship you a brick.

Other etf's like the GLD have physical gold backing them, but there are questions about how much is really there with all gold contracts.

Buying spot ounce coins from a dealer is a good method if you aren't gonna sell in the next 15 years, but you gotta worry about proper insurance and storage of it. It's the same as hiding all your money in a shoebox and having the house burn down. Safety deposit boxes are good, but the fees will eat any returns you would expect.

Investing is fun, but precious metals will never double or triple in a few years. You are lucky when they barely move at all. Gold is a store of wealth rather than for growing it. With a modest sum you are best off looking into Warren Buffett's advice and just buying an index fund with it in a tax advantaged account like a Roth IRA. But you can never really go wrong with gold as long as your expectations are realistic.


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