What is the attraction of gold as an investment?

Discussion in 'Business & Economics' started by Seattle, May 25, 2021.

  1. Seattle Valued Senior Member

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    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?
     
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  3. Jeeves Valued Senior Member

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    Tradition and sentiment. Gold was what people sewed into the hem of their garments to flee from one conflagration or another persecution since written history began. Gold has the feel of solidity, permanence, reliability. It's the symbol of wealth in every fairy tale and proverb of every culture. People kill for it, risk sunstroke, snake-bite, pirates, vengeful pharaohs and frost-bite for it, hoard it, bury it, build great big semi-pregnable vaults over it and gild the pictures of their saints, gods and monarchs with it.
    Gold is the icon of success, piety and economic well-being.
     
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  5. Seattle Valued Senior Member

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    Yes, I'm aware of the history but regarding actual investors, I don't get it. It's a terrible investment.

    I understand (but don't agree) why some people have a few gold coins in their house just in case of the zombie apocalypse but putting 5% of your assets into a terrible investment...it doesn't compute.

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  7. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    It's typically a good hedge against a falling stock market... it holds up reasonably well during recessions, although for the best part of the last hundred years it has been nowhere near as good as the equity market. Only for limited periods (i.e. recessions).
     
  8. Write4U Valued Senior Member

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    Gold is not a native metal of earth. It is produced by extremely large stellar pressures.

    Gold does not oxidize. It is a noble metal which does not react to oxygen.

    Gold is an excellent electrical conductor.

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    Gold is easily malleable.

    Gold is usable in sterile environment.

    Gold is a valuable commodity in medical applications.
     
    Last edited: May 25, 2021
  9. Jeeves Valued Senior Member

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    Actual investors are subject to emotional imperatives, like everyone else. Actual people often make terrible decisions. I stopped trying to "get it" some time ago.
     
  10. Write4U Valued Senior Member

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    Perhaps, this may be of interest. Gold is a limited resource deposited on earth via stellar bombardment. When we eventually run short on gold, the price will literally skyrocket, because it costs much more to artificially produce it than it's worth from mining.

    Can gold be created from other elements?
    Category: Physics Published: May 2, 2014
    https://wtamu.edu/~cbaird/sq/2014/05/02/can-gold-be-created-from-other-elements/#
     
  11. billvon Valued Senior Member

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    Some people get it as an "after the zombie apocalypse" hedge, when all fiat currency is worthless. The presumption is that gold, as a metal with inherent value that has been valued for millennia, will still have value after society collapses.

    Of course this doesn't work if you are merely invested in the gold market or in gold futures, which is how most people invest. You have to actually have the metal itself.
     
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  12. Seattle Valued Senior Member

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    8,874
    I think that applies to any of the heavier elements doesn't it? I don't think this has anything to do with gold as an investment however.
     
  13. Seattle Valued Senior Member

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    You also have to have to be pretty bad accessing probabilities.
     
  14. billvon Valued Senior Member

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    Yes. But as humans we are good at seeing the unusual, so when someone wins the lottery, or makes a million on a (normally) bad investment - those are the ones we remember, and some people take that to mean that those things are actually good investments.
     
  15. gmilam Valued Senior Member

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    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?
     
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  16. Seattle Valued Senior Member

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    People have fantasies of being able to get out of a bad situation by bartering with a few gold coins even though road traffic, the power grid going down, lack of food are much higher priorities.

    And that is just the nuts. None of that applies to investors who buy a few gold mining stocks just to "diversify" their portfolio. How does putting 5% of your portfolio in gold stocks do anything?

    Gold hasn't always even been the hedge against inflation that it's supposed to be. In the U.S. look at a chart of the spot price of gold. You have to start with 1972 (?) when we went off the gold standard and gold was allowed to freely trade.

    In order to have made any money you have to (in hindsight) pick specific spots where you would have gotten in and out. Look at real estate or stocks and it's an upward slope with some minor down periods or sideways periods. With gold it's hard to do anything other than lose money.

    The gold bugs are always talking gloom and doom but it never arrives and when there are periods when (according to theory) gold should move up, it still oftentimes does not.

    If you bought gold at its peak in the early 1980's, now, 40 years later, you would still be losing money.
     
  17. Write4U Valued Senior Member

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    I am not speaking of capital investment. Investment in a limited resource is always a bad deal.

    I am talking about investment in gold bullion, which has a timeless value, regardless of market conditions.
    Gold is not a luxury item. It has specialized high-end scientific uses and is in limited supply.

    Gold Nanoparticles: Preparation, Properties, and Applications in ...
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4101904/

    1 bar of gold yields an enormous amount of gold nano-particles!
     
    Last edited: May 25, 2021
  18. Seattle Valued Senior Member

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    I know you like to post whatever it is you post regardless of the subject matter but even your first statement makes no sense "investment in a limited resource is always a bad deal"?

    The thread wasn't about where gold came from. I think you posted that it didn't come from Earth. Of course it came from Earth. Before Earth was formed it came from a supernova but so did most other heavier elements.

    However that has nothing to do with the topic. Regardless as to whether something is useful (most things are) the fact remains that a chart of the price of gold over time shows that it's not a good investment.

    If you make jewelry out of gold then of course you need gold. Again, the subject was gold as a good investment which it has proven not to be. It's a store of value perhaps when the world is ending. For some cattle or sheep serve the same purpose.
     
  19. Write4U Valued Senior Member

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    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.
     
  20. Michael 345 New year. PRESENT is 72 years oldl Valued Senior Member

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    Or a pile of brains with which to set zombie traps

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  21. Seattle Valued Senior Member

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    Bullion doesn't earn anymore than any other gold. It's a supply issue if you use it in your business.

    Everything is "native" to Earth in one sense and in another sense no metal is "native" to Earth. No elemental metals are produced here. All heavier elements were formed before Earth was formed.
     
  22. Write4U Valued Senior Member

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    Who said anything about a business or earning.?
    Let me put it this way.
    When it comes to having something of enduring value, I'd rather have a 1600 oz of gold than lead in my safe.
     
  23. wegs Matter and Pixie Dust Valued Senior Member

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    Gold doesn’t seem like a great investment especially during crazy unexpected disasters. What’s weird though is what little return many receive on gold as compared to the stock market, yet swear by gold. Lol

    What are your thoughts on dogecoin, Seattle?
     
    Last edited: May 26, 2021

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