Gold - why so political?

behaviorkeltonApril 5, 2009

When bringing up Gold as a part of a portfolio, people seem to either groan and roll their eyes ("great, another right wing radical")... or they have a positive response ... either way, the discussion hits a political nerve.

I'm interested because:

*Man! How can we keep on printing paper money??? Maybe I just don't have the economic sophistication to "get it", but the system seems very fragile.

*It would be cool to actually hold something real instead of abstract stock statements.

*It could increase in value (of course)

My first attempt at buying Gold happened in 2002. I think it was $270/oz at the time. Everyone told me not to do it. That it could go way down. Then, pushing ahead, I called a gold broker, but was stunned by the fees involved. As I recall, a $270 oz of gold bullion ended up at $285 in real cost with all the fees. That was a turn off, I hung up the phone and gave up on it. Shucks!

BK

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triciae

Precious metal boullion has always been a part of our portfolio. We rebalance periodically to keep it around 5-8%. We also include some coins with numismatic value in the mix (St. Gaudens, for example).

In addition to gold, we also hold 100 oz. silver bars & bags of junk silver.

Buying in larger quantities (as example, a dozen Maple Leafs) at a time reduces the fees.

Holding bullion does require, at least in our opinion, the use of a depository. But, even so, we feel it should be a part of every balanced portfolio same as other "hard" assets (art, antiques, etc.)

/tricia

    Bookmark   April 5, 2009 at 3:53PM
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joyfulguy

Hi time off for good behaviour,

Greetings again.

How have things been going?

When not backed by a hard asset, the value of paper money depends on the trust of the people interested in it that it will retain its value, i.e., that people holding it and trading it have faith that it will continue to be worth something tomorrow ... and next year.

And when I say, "something", I mean about what it is worth today ... or else they may fear that it'll only buy 3/4 as much ... or half as much ... next year.

The U.S. has built up a mountain of debt in recent years ... or, rather, has been digging a big hole of debt.

And, what with the adventure in Iraq, they've been running huge deficits ... prior to the huge bailouts of recent days.

When you're at the bottom of a big hole, wondering how you're going to get out ....

... first/best piece of advice is - quit digging!

Another problem - all of those imports.

Far larger than exports.

How can this continue?

Where's the money to come from?

The banker to the U.S. - the Gov't. of China?

Did you note how the Chairman of the Gov't. of China asked Hillary the other week how well the U.S. is managing their money business?

When they ask such questions in public - things are serious.

What if they quit lending?

What if they ask for double the current rates of interest?

What would happen in the current situation in the U.S. if interest rates were to grow substantially?

Many borrowers who think that they are in trouble now ... would be sweating blood.

I don't see how our economies are to escape inflation: when you print an extra Dollar when there used to be one ... how can you avoid having the price of bread double?

If you buy gold bars ... will you go to the storehouse to pick them up and store them at home?

Gold doesn't produce anything ... just sits there, like an abandoned car ... maybe use the bar of gold as a doorstop (but don't tell anyone that you have it).

When sold and returned ... assay costs.

You're counting on it increasing in value over the time that you hold it.

Some claim that most minted coins are sold at a substantial premium.

Zimbabwe's been finding that paper money isn't worth much more than the value of the paper on which it's printed.

Good wishes for skilled navigation through these only partially charted (uncharted?) waters, kelton.

ole joyful

    Bookmark   April 6, 2009 at 1:30AM
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chris8796

It is so political because most people that advocate holding physical gold are those predicting economic armageddon. I would agree a percentage of your portfolio should be in hard assets, but I don't think you need or want physical custody. Most physical investment in gold is through depository reciepts, a piece of paper saying your entitled to a certian amount of gold in the depository. Gold as an investment is used to hedge inflation risks in currencies. It is not a hedge against collapse of the fiat currency system.

    Bookmark   April 8, 2009 at 1:08PM
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joyfulguy

Hi chris ... 87, goin' on 96, maybe?

If gold, " ... is not a hedge against collapse of the fiat currency system", ... what do you recommend as an alternative?

ole joyful

    Bookmark   April 8, 2009 at 11:40PM
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chris8796

Ammunition, If fiat currencies were to collapse it would mean the end of civil and contract law. There would be no orderly market for any asset. I can't imagine we will ever move to an asset backed currency for a variety of reasons. In the end, even if its asset backed its still a government promise. Hugo Chavez wants a currency backed by oil reserves, maybe you can diversify into Petro dollars if Chavez gets his way. You'll sleep better knowing your currency is backed by oil reserves and Hugo Chavez.

    Bookmark   April 9, 2009 at 9:38AM
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dreamgarden

behaviorkelton-"I'm interested because:

*Man! How can we keep on printing paper money??? Maybe I just don't have the economic sophistication to "get it", but the system seems very fragile.

*It would be cool to actually hold something real instead of abstract stock statements.

*It could increase in value (of course) "

I have some gold in my portfolio. I am not an expert at predicting which direction gold will go, but the following newsletter arrived in my inbox today and might help offer another perspective about the questions you asked. I hope Larry Edelson is right!

"But today I want to talk about gold again. Why? Because short term, gold is not acting so well. ItâÂÂs broken some chart support at the $898 level, and it could easily pullback further, to around the $838 level.

For short-term traders, thatâÂÂs an opportunity to get out, go short, and make some money. But for investors, goldâÂÂs pullback should not be alarming ⦠should not scare you out of any positions ⦠and instead, should be viewed as a âÂÂwin-winâ situation.

Consider the following â¦

Two Possible Macroeconomic
Background Scenarios for Gold............"

A link that might be useful:

A âÂÂRealâ Win-Win Investment â¦
by Larry Edelson 04-09-09
www.moneyandmarkets.com/a-real-win-win-investment-2-33081

    Bookmark   April 9, 2009 at 11:08AM
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