The Sure Thing That's Falling Like A Stone

So after more than a decade long bull market in gold your only half sold on Gold, Tell me when you are sold and I will happily sell you mine!

It is becoming plain that the huge debts of the "developed nations" can never be repaid. There must be either default or massive inflation sooner or later.. It will be looked back on in history as a period of irresponsible use of paper currency. We all HAVE to believe in it to keep the giant "Ponzi" scheme going but when it fails, as it must, the holders of all forms of paper money will lose almost everything. The only way to keep some of your assets is to own a property and have some gold and/or silver which must be kept out of the banking system.

It has seemed to me for quite some time that those most critical of gold. Have two problems (amongst others). Firstly, they persist in thinking gold is a commodity. It is nothing of the kind. It is a currency, even in developing parts of the world where it is fashioned into jewellry, it is still a defacto currency. As the abominable Greenspan said during one of his saner moments: "....gold is always acceptable."

Secondly, in these situations, the critics are all "experts" who utterly failed to see and or understand what was happening when gold started its run. For those who came to the party in a timely fashion, the present retracement is nothing more than the usual pause for breath that we see a couple times a year. Eventually, gold will once more become a dreadful investment but that time has not yet arrived.

PS As regards the infamous "barbarous relic" comment, just because a well known person says something, does not make it true.

@TomRoundhouse
>Firstly, they persist in thinking gold is a commodity. It is nothing of the kind
That's totally wrong.

Gold is certainly *used* as a currency, and I would agree with your analysis if it were *just* a currency. But it IS a commodity as well. I consider it's use as decoration as towards the currency end of the scale, but it's chemical and electrical properties make it incredibly useful in all sorts of places. Even if we decided it was useless as a currency for some reason, we'd still be using it for electrical contacts, dentistry, medicine, colouration, cooling, shielding and a myriad of other things.

There will be demand for it until humans wipe themselves out, or find more useful materials/technology to replace it.

Gold is best viewed as an insurance premium against general financial collapse-- which seems a mite closer today than in the 1980s when inflation was falling. Say 5-10% of your asset allocation.

Hold bullion. or as close as you can get to the physical metal, and hope you never have to unearth it from Mr Benallack's 'dusty corner'.

Don't worry about the secondary-trading games ETFs and others play with the price. Worry that one day overplaying the greater game of fiat money will shatter the confidence of politicians' dupes, the electorate, in currency. Then your coins and bars would be more precious than you could possibly imagine.

Neil W

An annual asset tax would mean that you get poorer every year.

If you had an asset tax of (say) 5% p.a.......

I buy 20 ounces of gold, which is enough to buy me 15000 loaves of bread.

I have to pay one ounces worth to the government and have only 19 ounces for myself a year later.
If the price of gold and bread has remained the same, then I can now only buy 14250 loaves of bread.

I am therefore guaranteed to lose my buying power every year.

It would be the same if I had a house.
It might buy me 125000 loaves of bread this year, but if the house value is taxed at 5% p.a., I can only afford 118750 loaves of bread a year later.
After 300 years, the "family fortune" invested in an average house would have been taxed to the point where it wouldn't even buy a single loaf of bread, compared to the 125000 loaves that it could buy at the start.

As someone who held gold miners the last few years, but offloaded them between 2009 and 10, I've been thinking about the benefits of holding gold (or derived products) recently. My original reason for offloading all gold miner holdings was I though gold had become a bubble, shown by the general hype around it (demonstrated by airport machines and Tescos getting in on the act). I now hold my hands up and say I was wrong and will be using this dip to get back in.

Why? The currency events of the last year or so have, to me, demonstrated that western currencies (like their economies) are weak. Until now we've lived in a world of the dollar, but I feel that will change very soon. There is still no natural successor for so the only "options" I see are a currency basket or gold.

Up until now we've considered long term diversification in terms of stocks, bonds and cash. The way the world is going, I'm wondering if we should replace this with the three categories of emerging markets, developed markets and gold/currency basket. Because over the long term, I can only see western currencies depreciating in real terms hence rendering cash useless, and the only ways I can see to counter that risk is a basket of currency holdings or gold.

At the moment, "big business" is looking to *buy* your gold.
Do you think that they'd be wanting to buy your gold at high prices and risk being stuck with it if the price collapses?
Are Tesco that stupid?
Of course not. They know that the trend is still rising.

When, one day, I see queues of people outside gold bullion dealers, wanting to buy gold coins - like NRK depositors wanting their money.
When Tesco and high-street banks start offering to *sell* gold to Joe Public "over the counter".
Then we'll know that gold is close to the peak.

Id just like to point out to F958B that retail banks almost everywhere apart from the UK sell gold over the counter. The Uk is different due to the registration requirement with HRMC for bullion purchases over a given weight which make it difficult to own bullion vs teh tax implication in sufficient quantity to generate worthwhile returns.

Instead there are alternative routes to market such as www.bullionvault.com.

Additionally Id like to point out that Tesco - www.tescogoldexchange.com (no affiliation) recently started offering a cash for gold service.

Does either of these small adjustments make any difference in the global metals market. No.

Again just a thought

I'll be the first to point out the two big downsides to gold

#1 You gotta store the stuff.

#2 It don't pay dividends

#1 You gotta store the stuff.

Not as bad as it sounds - look at the panic to pull money out of the banks when the 2007-9 crisis was in full swing.
The banks "store" cash for you, but it doesn't stop the banks from going under and taking some or all of your money with them.

I even hold my own share certificates because I stand to lose too much if the shares were held in a nominee account that collapses.


#2 It don't pay dividends

That may be true, but gold has still far outrun the FTSE, even if you do include the FTSE's dividends.
Besides - most "investors" are actually "speculators" who are simply looking to flog their shares to a bigger fool. To most people, dividends are "sooo 1950's".

But, as you say; gold's lack of dividends will cause it to underperform equities on a very-long-term view. But remember that the economy has just *had* a boom that went bust and we're still bouncing along the bottom. Don't expect too much from equities for a few years - especially not after the 2012 US elections, when Obama realises that h's going to have to cut spending dramatically in the first year of his second term, to hold things together.

...........

re f958b mention of the safety or otherwise of nominee accounts.

presumeably all holders of isa's will be concerned.

could we have an article/discussion on this please.

thanks

I knew this article would be anti-gold even before I clicked onto the story, such is the anti-gold feeling here at the fool. Erstwhile Fool David Kuo has been beating up on gold for years - the fool!

I stand shoulder to shoulder with F958B on this - he tells you all you need to know.

What is this article about anyway? It sounds like a young investor trying to get his head around a new subject - and largely failing to understand it.

I particularly liked - "it's too early to call an end to its rally". HAHA - a decade-long 'rally'. Come on mate admit it - if this was the stock market it would be a 'raging bull market' - which is exactly what it is.

There's a rumour that Gordon Brown is thinking of buying into gold bullion - must be getting near the top!

...gold is coming down quite nicely

I just don't understand why mainstream investors like yourself think those that buy gold are wacky 'religious' types.

There's no-one more religious than the man who insists property is a one-way bet, as I was told it was throughout the last decade.

Instead, I first bought gold at £228 in 2003 and have been buying ever since. It's just an investment, that's all. And it's in a steep uptrend, so I buy on retracements.

I just don't know why the Fool doesn't get it. I know it goes against all things good in the world, but it's reality.

And Buffett readily admits he doesn't understand gold, which is why he doesn't believe in buying it. He should have listened to his father though, who was a renowned gold 'bug'.

I am not a particularly intelligent man, but Gold is so central to basic economics it's untrue. I urge you to read, and read again, the principles of Ron Paul.

Take a look at kingworldsnews interviews this weekend. Silver to reach $50 in weeks, gold to reach $2200 this year. Let's wait and see. The market is subject to short-term manipulation but the longer term trends cannot be stopped.