Gold as an investment
By Randell Tiongson on March 14th, 2012Here’s something I got from my friend Jun Gomez, RFP. Makes a lot of sense to me.
Question:
Is gold a good investment? Will it go up or go down in prices?
Answer:
It’s always a good investment:
If gold prices go down – give it to your wife. she’ll be happy.
If gold prices go up – sell it and make money and buy your wife a nice gift.
Either way, your wife will be happy.
Nice.
Hi Randell,
Nice post there. Either way, the wife is happy.
Technically, gold itself is not an investment. But a gold-mining stock is. Some sharing below from Mark Motive of Plan B Economics… It tells us the different levels of understanding of people at different levels.
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#1: If you ask the common man in the street about investing in gold, most will give you a strange look. After all, they believe investing is about stocks, bonds, and CDs.
?#2: If you ask someone with a bit more investing knowledge, they will tell you to buy gold during inflationary periods.
?#3: If you ask a relatively sophisticated investor, they will tell you to buy gold during deflationary and inflationary periods. Some may even say to buy gold during periods of uncertainty and instability, or when real interest rates are negative.
?#4: However, if you ask the world’s wealthy class about gold they will give you a very different answer. We’ve found that most of the world’s wealthy class doesn’t view gold as an investment at all! I would argue these folks have it right. Simply put, they consider gold to be a store of wealth and believe that anytime is a good time to own some gold.
Gold is considered a “safe haven” investment especially when USD is low and there is turbulence in the major economies, i.e. Euro, plus global events that upset the financial market like war, terrorism. It has gone down in price due to the strengthening US economy, and therefore USD is getting stronger (as there is speculation that the US Fed will raise interest rates making yields in USD more attractive).
It could still go on an upward cycle due to the Eurozone issue. It will definitely be an investment worth having.
Not surprisingly…. Warren Buffett doesn’t particularly like to invest in Gold.
http://business.time.com/2012/02/27/warren-buffett-on-succession-stock-buybacks-and-avoiding-gold/
This isn’t about gold but if readers are interested, here’s the just-posted COL Financial Fundamental Outlook for 2012 (first half), showing various graphs:
COL Fundamental Outlook – 2012 1st Half
The dollar is a form of currency. Like any other currencies, they tend to devaluate over time. The dollar was once backed by gold but was later removed during the time of President Nixon. With the way the fed is printing dollars to support the US economy and the debt increasing, there is no doubt that inflation or even hyperinflation may occur. This may drive the value of gold over the roof since this precious metal is a hedge against inflation. A much better investment though would be silver since its value in proportion to gold is historically low and it is form of metal currently being used in electronics, etc… Gold billions can be purchased and stored in Brinksmanship security vaults or through mining stocks and ETFs.