Why gold is a bad investment

"Up 500% since 1999"

What goes up must come down. Nobody can predict when gold will plummet, but it will.

Just curious, how many people here bought their gold form those compnaies that advertise on Fox News and cosneravtive radio shows? I heard that if you buy gold from them, you will NEVER see your money again because they charge you a huge premium.

Considering gold's rise, he poster may want to rethink his premise. Anyone having bough gold back at say 350 an ounce would certainly argue for holding gold. Of course if gold were to fall back 20% he original poser would no doubt congratulate himself for being right?

"Stop confusing a successful trade with the definition of investing."

More load of bullchit.
Every investment is a trade.

"Stop looking in hindsight and thinking the past predicts anything about the future."

History always repeat itself.

I've been saying this since fall of 2010, there will be a currency crisis in the dollar in the spring of 2011.

Here we are..front roll seats.

http://finviz.com/futures_charts.ashx?t=DX&p=d1

"What goes up must come down. Nobody can predict when gold will plummet, but it will."

They've been saying this for 10 years. Steve, you need to cover those gold short positions ASAP.

"Just curious, how many people here bought their gold form those compnaies that advertise on Fox News and cosneravtive radio shows? I heard that if you buy gold from them, you will NEVER see your money again because they charge you a huge premium. "

You had to be a complete moron to buy from those companies.

The way to have done it is to buy warehouse receipts.

>Just curious, how many people here bought their gold form those compnaies that advertise on Fox News and cosneravtive radio shows? I heard that if you buy gold from them, you will NEVER see your money again because they charge you a huge premium.

Also curious, how many of you sold your gold to Cash 4 Gold on MSNBC? I heard if your sell your gold to them, you got only half of the spot market value because they charge you a huge discount.

Gold hitting new highs daily.
At what point does to OP have to admit he was wrong ?

So this 'TRADE' we call GOLD just hit another high of 1530.50 today.

http://finviz.com/futures_charts.ashx?t=GC&p=w1

The dollar crisis starting to pick up steam.

http://finviz.com/futures_charts.ashx?t=DX&p=d1

"Just curious, how many people here bought their gold form those compnaies that advertise on Fox News and cosneravtive radio shows? I heard that if you buy gold from them, you will NEVER see your money again because they charge you a huge premium.

Also curious, how many of you sold your gold to Cash 4 Gold on MSNBC? I heard if your sell your gold to them, you got only half of the spot market value because they charge you a huge discount."

wait, what about those people who want your old jewelry? i sent them a whole ziplock bag o'gold. you mean.........you mean my check is not coming?

Never, just as I will never change my thread that stocks are always a better investment than owner-occupied real estate, and was laughed at for years.

Till it came true - as it always does.

"Gold has not been "the" best investment even among commodities over the past ten years, let alone among allmasset classes."

Okay.
Give me one then? Since 2000, give me another asset that outperformed gold.

Give me another sector in the stock market that has outperformed the mining index since 2000?

Well, gold doesn't produce income, but it's sure returned nicely recently by way of appreciation.

Is "not a good investment" some sort of theoretical argument?

Apparently Jim Cramer, who is one of just a few people on TV more than Donald Trump, said to buy gold and has done well at least on this call: http://streeteasy.com/nyc/talk/discussion/5195-cramer-says-to-buy-gold

i put all my money with goldline

Wtushy, you are a genius. Fortunately, you can stay in your dark small apartment day trading, and be completely sequestered from the underaged.

WBottom missed the NYC estate bottom. *ouch*
Wbottom was looking for a double bottom in the economy. *ouch*
Wbottom was looking for a double bottom in the stock market. *ouch*
Wbottom have no clue about precious metal and missed the one of the great bull markets in the 21st century. *ouch*

What have WBOTTOM EVER GOTTEN RIGHT? Why is he here?

Look at this so call 'BAD INVESTMENT' go...

New all time highs again! 1537!! CHOO CHOO!!

Saiyar1,

You still haven't defined the difference between a successful trade and investing.

"Stop confusing a successful trade with the definition of investing."

If you had bought Gold when this post thread was created back in Nov 2010 you would have paid $1358. Today it's at $1586

If you had bought Austalian dollar denominated government bond fund or ETF (or one with Australian dividend paying stocks) you would have made even more money, AND have an interest-paying asset. See, the Aussie dollar has gone from US $0.82 to $US1.07 in the past year.

I could name 100 other investments that would have beaten gold in about 20 minutes.

gold is simply reacting to central bank policy across the world in the face of deflation. in a fiat based system, gold is the ultimate barometer of trust in paper currencies. thats why this phase was different in 2007 into 2008 and now into 2011. whats amazing is we see what is happening in bond markets in EU, and look at our bond market in the face of this debt situation. When US treasuries are no longer perceived as the flight to quality, thats when gold goes up $50/day and goes parabolic..treasury yields likely will rise at same time and the dollar could very well strengthen against other major currencies..

Gold is also much more valuable in a zero interest rate environment. No opportunity cost or carrying cost.

No need for any sort of verdict on fiat currencies.

And as I have detailed in detail on this thread previously, many other commidities would have been even better investments than gold over the stated timeframes.

Gold itself is a fiat currency, by the way.

"Gold itself is a fiat currency, by the way."

no, gold is finite. you cant print gold..just my two cents

If currency means a generally accepted form of money, then I think many people will say if it walks like a duck , quacks like a duck, then it's a duck. By the way looked up "Money" and the definition was commodity or asset such as gold, an officially issued currency that can be exhanged for something equivalent.

If you haven't already I very much recommend Felix Zulauf's latest interview. He makes a brilliant case that the Euro is headed for devaluation and/or the exit of some countries from the Euro. Add to that a highly probable QE3 and the case for Gold is stronger than ever.
---------
And in answer to the post about Australia Australia is a play on China and demand for natural resources. This is correlated to Gold but not the same thing. There's a distinct possibility China slows which would hurt the Australian dollar.

One has to be nuts not to have some gold exposure at this juncture.

If bobbleheads of alanhart were considered for many millenia a store of value, and had been accepted by a large market as being worth 3.5x what they were in 2005 without any abnormal spikes, then I might consider them a good investment, then why not gold?

Mr Bernanke himself was grilled by Congress this week on the role of gold. Why do people by gold? "As protection against of what we call tail risks: really, really bad outcomes," he replied.

http://www.youtube.com/watch?v=2NJnL10vZ1Y

Unfortunately, it doesn't do that. As Mr. Bernake also said, "Gold is not money."

Held by the world's central banks.. so they prefer gold to money?

"If gold is not money, then why do central banks hold it?"

Bernanke: "tradition?"

classic.

Bernanke probably just has gold confused with processed meat products that are made to religious specifications. Easy mistake to make, happens all the time.

Gold sucks. I threw mine out last night.

i actually sold my gold bar 6 weeks ago when we were at 1530 an ounce. Still got my GLD calls though

LOL - years later, and I still see threads and comments like this.

That's just awesome! We must still be far away from the final bubble phase.

hey MMafia...Ive been on the ride with you my old friend for 4+ years now. It started in mid 600s in mid 2007 when euphoria at the peak was rampant. Nobody believed the credit crisis story back then, it was just go on your merry way and ride the up wave.

Although I view gold as an alternative form of currency, I dont expect it to be used for transactions. Rather, I view gold as the barometer for faith in global fiat currency in general. It should rise when central bank policy is misguided, using Keynesian theory to counteract deflationary forces. In a paper currency world, it was a huge race to debase especially back in 2008-2009. Gold just doesnt go down and everyone seems scared of it and saying its a crowded trade. Well, that doesnt sound like a euphoric bubble to me. Once gold goes parabolic, the whole play will be over and many will get really hurt if it falls fast back to below 1000. What if that fall comes from 2000 or 2200..doesnt seem like much speculative activity is in it yet in terms of a short term trading wave.

MMAfia! Glad you're back!

The Final Bubble Phase is just beginning. Has nothing to do with gold not being money, though, because Come the Revolution, I'd still rather hoard crickets because you can eat them, and gold all you can do is stare at it.

UD, alas you are misguided: "Gold just doesnt go down."

Oh yes it does, and it did, and it has, and it will.

"using Keynesian theory to counteract deflationary forces"

What, pray tell, are you referring to?

Gold Hits New Record In Asia, In Sight Of $1,600/oz

http://online.wsj.com/article/BT-CO-20110718-700677.html

"Gold just doesnt go down." - im referring to the trading momentum since mid 2007. Gold is acting like a stock that went from 100 to 250 and the reason its not going down is because it will eventually trade at 350, kind of like AAPL over the last 2+ yrs. When gold hits $1800-$1900, we will know why it seemed like it would just not go down sustainably. It was on a path to a higher level. We had this argument about gold at $800, at $900 at $1,000, and now at $1595.

"using Keynesian theory to counteract deflationary forces" - cmon now. do I really need to answer this?

And stevejhx, yes I agree gold WILL fall and fall hard..I even said in my last comment - "Once gold goes parabolic, the whole play will be over and many will get really hurt if it falls fast back to below 1000."

But the fall will be after the parabolic move hits. Maybe we fall from $1900, maybe $2200..it didnt get stupid yet

I can't see how Gold goes down as long as rates are where they are. Of course there's always the unexpected, but the cost of carry is not that high when you have zero short term rates. Plus the Fed policy is clearly promoting a lower dollar. While we undoubtably will have corrections I think the trend is still still higher. Right now the case for Gold is still too strong.

>yes I agree gold WILL fall and fall hard
>But the fall will be after the parabolic move hits

So your FIRST prediction is that gold will go "parabolic".
And only then does your SECOND prediction come into play that it will fall hard.

yes, but Ive felt that way for years now and posted those thoughts here on SE before...when gold was much lower. Its been a steady rise so far, with the occasional short lived selloff. It has not gone crazy yet. When it does, the play is over and the fall will be hard.

So if it doesn't go crazy, then the whole pattern will have been simply a "steady rise" "for years", of which nothing is wrong and there is simply no remarkable news.

The Fed has an easy way to make gold go down, it's called raising rates.

"So if it doesn't go crazy, then the whole pattern will have been simply a "steady rise" "for years", of which nothing is wrong and there is simply no remarkable news."

I guess not..its just a feeling that I think it will get silly and pop before it really falls

the dollar is being dumped by smartmoney. gold rises. what else is new? it will accelerate (log growth).

While I am an owner of New York real estate (Chelsea condo), I must say that gold has much better intrinsic value drivers than Manhattan real estate. Take a look at the April report for Manhattan real estate, with specific attention to Chelsea: http://www.radarlogic.com/products/productsservices_research.htm. While financial district and midtown are still languishing near their lows, Chelsea/West Village and Soho/Tribeca are almost at their peaks again. But the most important thing to view here is how few transactions are occurring, in Chelsea, you're looking at like 10 sales/month. This is a completely opaque market, with extremely limited supply, with condos selling at around 5% cap rates.

When I compare the opacity of Manhattan real estate to gold and commodity investing, it isn't even close. If you need or want to live in the city, buying a condo here is the way to go, but as a pure investment, it is a very poor decision. In this negative real interest rate environment, precious metals have, and will, outperform Manhattan real estate.

We comment on precious metals and commodities greatly on our website, feel free to take a look: www.realfinancenewsletter.com. Our performance statistics can be found here: www.lakshmi-capital.com/performance.

Urban, I think people jump to the word bubble too much lately. Not every price rise is a bubble, and usually it's not obvious until afterwards.

Lakshami - have u checked out the urbandigs.com real time manhattan inventory tracking system I built?

riversider - I agree..people were saying gold was a bubble at 1,000. In order for it to be a bubble, u need that euphoria and mass speculative appeal and 'ill borrow to buy more of the stuff' mentality..that means cab drivers, nannies, etc.. are all in on it. gold is hardly the case of a bubble and I dont think investors are going on margin to double down on gold.

Lakshimi - http://lakshmi-capital.com/2011/06/why-greece-is-not-lehman/

"What I mean by this is that the bankruptcy of Lehman Brothers was unforeseen by markets, and thus, unprepared for."

some saw the signs much earlier than bond holders or cds speculators did for Lehman. as long as u understood the nature of the credit crisis in mid 2007 and 2008.

http://www.urbandigs.com/2008/07/vix_hits_28_fear_level_rising.html

http://www.urbandigs.com/2008/07/commerical_sector_at_high_risk.html

tons more from writings on urbandigs.com in 2007 and 2008

This should settle all arguments...http://en.wikipedia.org/wiki/Gold_as_an_investment

What is this Wikipedia?

Riversider, this Wikipedia is an online encyclopedia that the general public can edit, following certain guidelines.

And don't call me Shirley.

Wow, of all the people not to understand sarcasm...,,

I just want to wish you guys good luck, we're all counting on you

rs, while sarcasm can be annoying and banal (and your comment was), good sarcasm generally includes an element of clever (which yours did not).

ah's response was both more sarcastic and clever than your feeble attempt.

Oh riversider, you've got a long way to live up to aboutready's standards. A long way.

so true. so very true.

true and sad, right?

Her first post and she spent it on me. How special...

Folks,

Whatever you want to call it, the bottom line is that Gold will continue to rise for whatever reason you would like to give it. You can disagree with it, hate it, love it, dream of it, whatever. Doesn't matter.

It will continue to rise. And when the rise starts to become parabolic like it did in 1980 when there were lines forming that wrapped around blocks of local gold pawn shops (we're not there yet, far from it still), there will be those who will profit from it and those who will despise it and miss the boat.

Choose a side.

I am choosing the side of making a profit from it. It won't go up in a straight line, but we will have a parabolic bubble phase, and it's definitely not here yet.

Being right does not necessarily mean making money folks. But making money is making money, emotions aside.

"the bottom line is that Gold will continue to rise for whatever reason you would like to give it"

Gold is an inflation hedge. Gold is a deflation hedge. Gold never goes down. Gold always goes up. Everyone should put their entire net worth into GOLD - the ultimate asset, the ultimate investment, the only investment that is GUARANTEED TO GO UP FOREVER, no matter what people think about it. Just buy it already.

Either that or it's the ultimate ponzi scheme.

gold is a currency hedge.

"GUARANTEED TO GO UP FOREVER"

Now that's just nonsense.

As I said, it will become obvious when the real bubble in Gold comes, just like it did back in 1980.

Back then, there were lines forming around pawn shops, everyone was talking about owning gold (as in, if you asked a room of 100 Joe SixPacks if they owned gold, over 80 of them would raise their hands) and gold mining stocks were exploding/detonating higher just like the DotBust stocks did during its bubble with doubling prices happening on a daily basis.

When you start seeing those kind of events taking place, then you know the parabola has come, the multi-decade Gold bull is putting in its final parabola top, and you should start scaling out into other asset classes that makes sense at that point in time.

We're not there yet. And we will have many ups and downs on the generally increasing price behavior as has been the case for the past decade.

MMAfia - please let us all know when the "parabola has come" so we can all get out at the top. TIA.

"gold is a currency hedge"

Yes, it's a currency hedge, an inflation hedge, a hedge against the housing bubble implosion, a hedge against Bernanke, a hedge against nuclear war, a hedge against famine, a hedge against banks, a hedge against other precious metals, a hedge against stocks, a hedge against water scarcity, a hedge against overpopulation, a hedge against the Euro crisis and a hedge against bad breath.

THAT'S WHY YOU SHOULD PUT 100% OF YOUR MONEY IN GOLD. Duh.

The best thing about gold is that it's simple to calculate its intrinsic value. The instrinsic value of GOLD is the current spot price multiplied by a factor of 1.5 or greater. Therefore GOLD is always undervalued by at least 33%, no matter what the spot price is (luckily).

"MMAfia - please let us all know when the "parabola has come" so we can all get out at the top. "

I already did, if you bothered to read my post.

"I already did, if you bothered to read my post."

I did - I'm asking you to let us know in real time, not 4 years in advance. Please post the fact at the time it occurs - TIA.

LOL

R u trying to trap me into being a TOP caller?

Nobody knows for sure exactly when that will be, but sure, astute people will have a sense when the odds become more in their favor to start scaling out, even if not at the top.

I don't come here that often anymore, but when the signs I've alluded start emerging, I'll be back.

And at that point in time, I will be telling people the opposite, which is to start scaling out. Which would be a very unpopular thing to do as the parabolic euphoria would have affected most people.

Similar to what I was doing back in 2007 on these boards, when it was very unpopular to argue that housing would go down, yes, even in *gasp* NYC.

Spunky, where are you???? =D

What if GOLD never becomes parabolic? What then?

Also, should we sell if GOLD hits $5000/ounce or should we wait for $10,000/ounce? Thanks again.

Gold is a momentum vehicle. While real interest rates remain negative, and the pace of inflation is quickening (i.e. CPI year-over-year growth that continues to increase), gold will continue to rise. Placing targets on the price of gold is a wholly futile activity because gold has very little industrial value. The only thing that can be determined with reasonable certainty is direction, not price. With all of the currency debasing activities going on in the world right now, investors will continue to lose confidence in paper currencies and increasingly turn to gold as a hedge against not just the dollar, but the yen, euro, and pound too. With gold currently comprising less than 0.7% of the world's total financial assets currently, there is plenty of room for appreciation. Also, the University of Texas endowment fund recently purchased $1 billion in gold. Since their fund size is $20 billion, this implies a 5% allocation toward gold, a huge increase from the 1% standard in most institutional investors' portfolios. As more and more institutional investors increase their allocations to gold, the price of the metal will skyrocket.

More analysis at www.realfinancenewsletter.com.

"this implies a 5% allocation toward gold, a huge increase from the 1% standard in most institutional investors' portfolios"

I don't get it. If GOLD is the ultimate investment, why not have 100% of your portfolio in it? Why limit it to a measly 5%???

It's unlikely than a multi-decade bull will not end in a blow-off top. Especially if the asset is a commodity.

It could happen. It could be that there is no parabolic ending. But history will reveal that odds favor a parabolic ending for such a long secular bull in a commodity asset. They don't tend to just sputter and die after 10+ years of build-up.

MOST IMPORTANTLY, nobody knows what the nominal price will be. Anyone who thinks they know what the price to sell at is either lying, disillusioned or lucky.

There is no nominal price target. A better metric to look out for is the accelerating rate of return or of changes in the industry landscape, not only in the metal but in its derivatives, including junior mining stocks. As a simple example, monitor the rate of hostile take-overs in junior mining companies.

"I don't get it. If GOLD is the ultimate investment, why not have 100% of your portfolio in it? Why limit it to a measly 5%???"

Anyone who puts 100% of their portfolio into one vehicle deserves to get their face ripped off by the banksters.

LOL. Enough bantering for now... hope to cu in a year or so in another "Gold is BAD!" thread at higher prices!

It's funny how people argue against something being a good investment as it continues to go up from a low of around $300 an ounce. And I suppose these same people will have an I told you so moment when Gold finally comes off its decade and a half long climb.

"It's funny how people argue against something being a good investment as it continues to go up from a low of around $300 an ounce. And I suppose these same people will have an I told you so moment when Gold finally comes off its decade and a half long climb."

You're right. Anything that goes up consistently has to be a great investment. Just look at U.S. residential real estate from 1995-2005 - by 2005 it was a FANTASTIC INVESTMENT - after all it went up for a decade straight.

Exactly if you had argued that real estate was a bad investment in 1995 you would have been dead wrong.

"I've been to Hollywood
I've been to Redwood
I crossed the ocean..." ("Heart Of Gold", Neil Young)

Good tune!

The price of an ounce of gold rose over $1,600 yesterday. I have frequently observed that gold is a hedge against out-of-control governments. It is a hedge against reckless fiscal and monetary policies. Often in the past, such policies led to higher inflation, which is why gold is widely perceived as a hedge against inflation. However, reckless government economic policies can also lead to financial ruin and deflation.

The price of gold is up at a record high in all the major currencies, suggesting that out-of-control governments are a worldwide plague. The nominal average price in dollars rose to $1,528 during June. In real terms, using the CPI as the price deflator, the price rose to $682, which was still below, but nearing, the record high of $865 during January 1980.

http://blog.yardeni.com/2011/07/price-of-gold_19.html

Riversider:
"Keeps me searching for a heart of gold,
and I'm growin' old..."

Just remember, folks, it's impossible for GOLD to go down. Now go out and buy some!

"You got the gold,
I got the silver..." ("Got The Silver", Keith Richards)

how relevant.

about how relevant is it?

She's back. She may be tanned and rested but she's still not ready.
So she trolls me looking for a fight.
Go gather your slaves. falcogold: report for duty!

troll? so you are saying that keith richard's lyrics are indeed relevant to whether or not one should buy gold? fancy that. i was simply making an observation that they are not.

have fun with your 9 (count 'em, 9!) friends.

I don't get it Truth. To log on for no other reason than to pick a fight? People need to get a grip.

i think you should take RS's advice, truth. you should log on to discuss whether or not gold is a good investment, or what you think about the listing at 330 WEA.

And unlike U.S. treasuries Gold cannot get downgraded.

Today is really odd, Bonds & Gold are rallying big, while stocks are diving. Gold is up $31 and the thirty year is up over two points(ten year up a point)

Just buy more gold. It is a perfect hedge against good news AND bad news. It always goes up, no matter what the news is. That's why you should put 100% of your money in it. IT'S LITERALLY IMPOSSIBLE FOR THE PRICE OF GOLD TO EVER DECLINE.

Hey, maybe we should ask Steve for an update on his perspective on gold!