Comments on: Investing in Gold

By: James

James — Wed, 22 Jul 2009 20:51:12 +0000

The only thing this article doesn’t address, is I think, the role of gold in one’s overall portfolio. For example silver is only weakly negatively correlated with other types of assets, but its not clear if gold is as well. If so, what sorts of assets?

Also, about how much gold do you want to add to your portfolio?

Is good really a good hedge against inflation? How has gold performed relative to inflation?

Unfortunately this posting doesn’t answer these questions.

Be nice if it did.

By: Ross

Ross — Sun, 28 Jun 2009 20:32:44 +0000

While gold mutual and exchange traded funds do have their positives. I’m a proponent of investing in actual bullion.

Shares in funds are still paper. If a healthy proportion of savings (don’t go crazy putting more than 30% of savings in precious metal investments) is invested in gold as an inflation hedge it might as well hedge counter party and systemic risk as well. Actual bullion products give this advantage.

By: Tom

Tom — Mon, 25 May 2009 13:19:34 +0000

Investing in gold is one of the best option available for those people who are expecting for good return in future.

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Tom

By: kuemi lee

kuemi lee — Fri, 27 Feb 2009 15:49:35 +0000

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By: Jason

Jason — Mon, 09 Feb 2009 22:03:25 +0000

Rare gold coins should also be a consideration. Even if the coins weren’t gold, the collectible status of them holds value making them a reasonably safe form of investment.

Gold coins are easily liquidated, still have plenty of profit potential not to mention the privacy aspects of gold ownership.

By: Andy

Andy — Mon, 02 Feb 2009 13:59:24 +0000

Some other ways to invest in Gold are ETF’s and the actual stocks of miners. One word of caution though, beware the tax consequences of a Gold fund.

By: Brent

Brent — Tue, 13 Jan 2009 17:54:30 +0000

I am highly disappointed at the conclusions that this article draw, and feel that the author should have done her homework before stating audaciously that “Gold is a standard form of investment that has proved itself again and again…”
Before I make my argument, I should preface that you could very well make money on it, and I don’t know any more than you do on what might work, but there’s certainly a lot to consider. I’ve read a good deal on precious metals, but your statement that it has “consistent investment returns” is unfounded. See the LME price graph for gold from 1980-1985. It fluctuates just like everything else, and quite significantly. In the long term, it doesn’t appear much better either, shown in the the 1975-present graph. At a $250 to $850 increase (1978 – 2008) over 30yrs works out to only 4.1% annually, less than a savings account (3%-5%) and less than the increase in the general price level of the S&P (8%). Below is an excerpt from “The Intelligent Investor” by Ben Graham, an old school “value” investor, and Warren Buffet’s finance professor:

“The standard policy of people all over the world who mistrust their currency has been to buy and hold gold. This has been against the law for American citizens since 1935– luckily for them. In the past 35 years the price of gold in the open market has advanced $35 per ounce to $48 in early 1972– a rise of only 35%. But during all this time the holder of gold has received no income return on his capital, and instead has incurred some annual expense for storage. Obviously, he would have done much better with his money at interest in a savings bank, in spite of the rise in the general price level. The near-complete failure of gold to protect against a loss in the purchasing power of the dollar must cast grave doubt on the ability of the ordinary investor to protect himself against inflation putting his money in “things”.”

This passage commented on by Jason Zweig, and investment journalist:

“The investment philosopher Peter L. Bernstein feels that Graham was ‘dead wrong’ about precious metals, particularly gold, which (at least in the years after Graham wrote this chapter) has shown a robust ability to outpace inflation. Financial adviser William Bernstein agrees, pointing out that a tiny allocation to a precious-metals fund (say 2% of your total assets) is too small to hurt your overall returns when gold does poorly. But, when gold does well, its returns are often so spectacular– sometimes exceeding 100% in a year– that it can, all by itself, set an otherwise lackluster portfolio glittering. However, the intelligent investor avoids investing in gold directly, with its high storage and insurance costs; instead, seek out a well-diversified mutual fund specializing in the stocks of precious-metal companies and charging 1% below expenses. Limit your steak to 2% of your total financial assets (or perhaps 5% if you are over the age of 65).”

If you’re worried about inflation, there are TIPS (treasury inflation protected securities) and I-Bonds, which account for changes in the Consumer Price Index and give a nominal interest on top of that. Even though I’m worried about inflation, especially with the large deficits the gov’t is posting and will continue to post, I’m sticking with stocks. If you can stomach the fluctuations, the stock market has thus far (~100 yrs) been the best bet.

By: Hal

Hal — Fri, 09 Jan 2009 17:40:24 +0000

That’s some good info on investing. Thanks. I’m watching gold right now in real time with the free widget Exactprice http://www.learcapital.com/exactprice and it shows a rally going on. With all these bailouts and government programs requiring further printing of money i’m thinking that the dollar is toast for a while and gold may be one of the better places to invest.

By: Stephen

Stephen — Fri, 09 Jan 2009 03:34:52 +0000

It is disappointing when you suggest something that cannot be added to your mint.com software. Please turn on manual transactions so “investments” like gold can be added to your networth.

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