Gold and precious metals outlook; also US dollar outlook

Well, I am nowhere near qualified or knowledgeable to comment on economics. (Like asking on the web is going to help, but at least its better than asking on 4chan).

So - what is your take on gold and precious metals. I took a peek and gold has quadrupled in value since 2004. If I had bought gold in 2004 I'd be doing pretty well now.

So.. is the gold price soaring up just a bubble? Is it going to continue that way?

While we're at it, what's the recent view on the US dollar? Its still the most stable currency, but what is its mid to long-term outlook?

 

I am periodically buying into the gold ETF, GLD. The folks advertising "physical gold" really push gold coins and the mark ups are too big for my tastes, not to mention storage costs or the risks of holding on to gold bars or coins. I think people have to hedge against inflation and the de-valuation of the dollar. I think the gold market is due for a correction, but who knows when, but the long-term trend is going to be up.

The dollar is still relatively the safest currency on the planet. However, I think we are at risk of re-living the stagflation of the 1970's. The 2012 elections can not come soon enough.

 

From my perspective, the folks hoarding gold are the same ones that stocked up on Y2K supplies and pre-Obama ammunition. It seems like a Chicken Little mindset, to me.

I think the odds of gold going down are much greater than it going up.

 

the people who i listened to that say buy gold when it was 800-900-and 1000 were right. every other economist was like lol nope gold is high invest in stock market which would of ended up being a terrible investment unless you really knew what you were doing or got lucky.

the same group that i listened to when gold was at $1000 are still saying gold isn't a buble until around $2,500. also, that's at current inflation rates. more dollar printing could move the bubble up.

on the other side the government is insane and could declare gold bullion illegal or put a price ceiling on it, but i still thinks it's better to have than dollars at this point.

when countries are moving out of the dollar and buying gold what does that tell you? the dollar is a sinking ship. the trend is only going to go up at this point minus some unforeseen circumstance.

 

Interesting theory but it does not reflect reality:

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http://cachef.ft.com/cms/s/0/8843dbb8-824a-11e0-961e-00144feabdc0.html#axzz1XxD8zNdx
Many factors drive the price of gold. One of the most important is the growing purchasing power of the growing middle classes in china and India.

Here is another interesting article:

http://www.resourceinvestor.com/news/2011/5/pages/why-central-banks-are-buying-more-gold-.aspx

 

There is a world of difference between nations and banks increasing their reserves and individuals investing.

 

The GLD has some issues but it is not true "paper gold". For me it is fine, it meets my needs, it does what I want at a cost I am willing to pay-this may not be true for others.

http://www.spdrgoldshares.com/

Either way people should not invest in investment vehicles or markets that they do not understand and are willing to monitor.
--- merged: Sep 14, 2011 9:18 PM ---

I don't understand your point. There is only one gold market. Individuals, governments, institutions, consumers, industrial users, producers, etc., all participate in the same market in a broad context of a fungible commodity like gold.

 

With Venezuela nationalizing their gold supply, I think we will see a sharp spike in the short term, as the banks try to acquire enough gold to cover all the gold they are supposed to be holding for Venezuela.

 

I only purchased tangible gold (mostly coins) as a contingency, not an investment. It's more expensive... commissions, transport, storage and/or insurance are typical costs on top of market price. I should sell the tiny bit I own while it's still on the rise (I just totaled my Cherokee).

Gold certificates (paper gold) can become instantly worthless. And who can forget Executive Order 6102? If you are wealthy enough and can afford to buy gold as a replacement to failing currencies, then you're MAYBE okay. Like the bunker-people planning for the apocalypse, they may be in for a surprise too. Gold is only valuable when everyone agrees it's valuable. Depending on how bad things could get... water, food, protection?... shiny rocks?? I'm going with shiny rocks every time.

 

Today, from my financial adviser:

 

1/07 GLD was at $60.17
1/08 GLD was at 85.13
1/09 GLD was at 86.23
10/08 GLD was at $71.34

In 08 there was a drop close to 20%.

If you invested $1,000 in January 08, you got 11.75 shares. January 09 that investment was worth $1013.20 (a 1.3% return). The current price is about $173. the $1,000 investment is worth $2032.75 (over a 100% return).

But i am a believer in dollar cost averaging. If you invested $250 at each of the four price points above, you would have, instead of 11.75 shares, 13.54 shares. Or today your investment would be worth $2,342.42.

If you assume a 20% correction on $2,342.42 your investment would still be worth $1,873.93.

Let's say you invest another $250 today and tomorrow we have a 20% correction. The you would have 14.98 shares, worth $2,073.93 after the additional $250 investment and the 20% correction. The ROI is $823.93 on your $1,250 investment or 65% in less than 5 years.

Heck, if there is a 20% correction, I might just go hog wild and do a $500 buy.

All that aside, the GLD did closely track with the actual price of gold.

 

From my point of view investing in the GLD is less risky than a direct investment in "physical gold". Like I said the GLD is not for everyone.

In a true "doom and gloom" situation, you can not eat gold! Who is to say gold will have any exchange value at all? In a true "doom and gloom" scenerio perhaps bullets for one's gun will be more valuable than gold. Perhaps, it boils down to semantics. What do you mean by "doom and gloom"? I personally don't invest in gold for survival of a post apocalyptic nuclear winter, who does?

 

We fundamentally agree.

 

I am one of those guys with a gold cost basis that is around $650 an ounce.
I am comfortable with GLD as a vehicle but I definitely feel the need to hold some physical as well.
I think the next $200 in gold is likely to be down.
GLD is really valuable for hedging a physical position. I don't want to sell my coins when I see a correction coming but I do short sell GLD or write option spreads.

 

Good call. I think in the next year gold will be in a trading range where we have already seen the peak and the low. However, I think gold relative to other commodities will see continued increasing premiums as the US dollar gets stronger and commodity prices decline. What do you think?

 

Well I have to admit that I thought the next $200-$300 would be down but I didn't think it would take only 3 days!
My fundamental reasons for owning it have not changed; if anything they have only grown stronger.
So I wanted to be a buyer of bullion around $1500. The ferocity of this decline makes me think I will get a shot at buying even a little lower.