Gold Prices

[DaleB]

In normal times, sure. But I think that's like saying "investing" in a life insurance policy is investing in an underperforming asset. Which it is, until you die!

Best to think of precious metals as a hedge against hyperinflation. If and when things do go to crap, gold may in fact turn out to be an "overperforming" asset.

If you're convinced things will go to crap to that degree, it might be better to "invest" in the things you'd need to sell that gold in order to buy. Food, water, toilet paper, barbed wire, ammunition, livestock farm land, whatever. But I'm not convinced that things will get to that point -- which is, I guess, why I'm not buying gold now that its price has finally exceeded what it was back in 2011.

 

[Cap'n Jack]

In normal times, sure. But I think that's like saying "investing" in a life insurance policy is investing in an underperforming asset. Which it is, until you die!

Best to think of precious metals as a hedge against hyperinflation. If and when things do go to crap, gold may in fact turn out to be an "overperforming" asset.

One probably does better to invest the life insurance payments elsewhere than a policy.

As for hyper-inflation, that's a good point, although you haven't fully convinced me. We may be on the verge of such a situation as @Chip Sylverne 's post seems to show. A lot of money has been disbursed. In South America, people in those economies tended to buy necessities as investments because they could sell them for a profit over their purchase price. When it happened in the USA in the late 70's, the government did do things to rein in inflation. Some of those actions weren't popular, but either they worked, or economic conditions changed to bring the inflation under control. Banks had to offer 20+% interest on certificates of deposits, and they bought them back within a few years.

 

[FastEddieB]

If you're convinced things will go to crap to that degree...

I did not say I thought hyperinflation was likely. In fact, I think its highly unlikely. But that's not to say its impossible - one only needs to look at history to see how it happens and how its rarely anticipated. And the horrifying effects it has on savings and investments.

But to belabor the analogy, one does not (hopefully) buy term life insurance because they think its likely they'll die over the next year. One often hedges and insures against what they know are unlikely, but possible, scenarios.

Anyway, I've posted this before, from a biography of Max Born:

 

[Chip Sylverne]

I'd caution you about looking at that gold chart and drawing any inflationary conclusions from it. Remember that we are in EXTRAORDINARY times regarding fiscal and monetary stimulus. If in a matter of weeks the Fed has reaches it's limits, as Powell has hinted, and Congress fails to pass another stimulus bill, we could be look at a pretty extreme deflationary shock as all that consumption dries up. Our economy is being diddled as it's never been diddled before by a large margin, and on this side of the looking glass I'm not sure any traditional forecasting rules apply anymore.

 

[Tom-D]

I'd caution you about looking at that gold chart and drawing any inflationary conclusions from it. Remember that we are in EXTRAORDINARY times regarding fiscal and monetary stimulus. If in a matter of weeks the Fed has reaches it's limits, as Powell has hinted, and Congress fails to pass another stimulus bill, we could be look at a pretty extreme deflationary shock as all that consumption dries up. Our economy is being diddled as it's never been diddled before by a large margin, and on this side of the looking glass I'm not sure any traditional forecasting rules apply anymore.

There is one reason to buy gold,, as a long time investment. you can't buy today and sell tomorrow, sooner or later it will bite you.

 

[Cap'n Jack]

There is one reason to buy gold,, as a long time investment. you can't buy today and sell tomorrow, sooner or later it will bite you.

That's pretty much true of all investments. As a couple of other examples, there are very few people who can make a living at day trading, and flipping houses makes for better television than an investment strategy.

 

[Zeldman]

I prefer investing in what may soon become a very precious metal....