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Should I invest in gold?

Jan 09, 2012 by Justin from San Diego, CA in  |  Flag
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The answer to that question is depends on multiple factors such as your age, your timeline, your risk tolerance, all other investments you have in place and your liquid assets relative to a prudent amount.

Comment   |  Flag   |  Oct 15, 2013 from Tucson, AZ

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Fulton J. Wood Level 5

Gold should be bought has a hedge against inflation. Three currencies that experienced dramatic drops, the Latvian and Russian Rubles, as well as the Ukranian currency, saw increases in the price of gold when priced in their currencies in the past 6 months of at least 60%, exactly what gold is supposed to do. As far as paper gold goes, the ETF GLDI pays a dividend as it uses the options market to generate income. The current yield is about 11%.

Comment   |  Flag   |  Jan 13, 2015

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I think the answer depends a lot on where you live. Think of gold as another currency. Don't believe the talk that gold is only used as a hedge against inflation. Currency devaluation and inflation are two different things entirely. Here in the U.S., there isn't an immediate risk to the devaluation/purchasing power of our currency. However, Russia, Iran, and other oil producing countries have seen their local currency drop dramatically due to the oil price crash. As these countries rely primarily on oil exports (anywhere between 70-95% of their revenue), their country's economic expansion is in serious trouble as their revenue has essentially been cut in half. As a result, their currencies have dropped. If you have lived in any of these countries during this drop, gold would have saved your purchasing power. It is all relative. THIS is how you should think of gold. It does nothing else except act as a currency and look pretty.

Comment   |  Flag   |  Jan 27, 2015 from San Diego, CA

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Steve Casull Level 13

To those that need to promote an allocation to gold, why? GOLD's value only "shines" during a downturn. Gold is too pricey for use in manufacturing. And the jewelery demand is still a nano-fraction of the price it's trading at now. It's like paying for Manhattan with shiny beads and colored cloth. I always get a kick out of those commercials, or Peter Schiff, that give expectations of gold hitting $10,000 or even $20,000 an ounce! It's like they don't put the whole algebraic equation together when making that statement. If GOLD went to $10,000. the economy would have already collapsed at probably $5000 an ounce. MAD MAX, marauders, farming, living off the land. No 401Ks, No retirement planning. So really gold is worthless once it climbs to a certain height. At that point, bullets would be the prime currency. And no, I do not utilize bullets in my asset allocations.

Comment   |  Flag   |  Jan 29, 2015 from South Jordan, UT

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I think the answer really comes down to how willing are you to be different than the broad markets. Gold has a poor correlation to equity markets. Sometimes that is a great benefit and other times it can be a tremendous frustration. I do not think gold has much investment utility in a world where sound monetary policies are pursued, and when the developed economies of the world have solid financial footing. When those factors are not present, then I think gold has some utility for investors that can tolerate its volatile nature. Gold is horribly misunderstood by most people and tends to attract polar opposite reactions as an investment.

The comment above that "you can't invest in gold because gold is not an investment, it's speculation" is a good example of this. Every investment is speculation to some degree unless we have figured out how to see the future. To assign that tag only to gold is not reasonable. We have to bring in the idea of probability to round out the discussion. Do you believe there will be consequences to one of the greatest monetary experiments ever seen? I'd say the probability of that is high. I cannot tell you what exactly they will be or when anyone will care about that risk. Therein lies the challenge of investing. Certainly don't take my word for it. Seek out recent interviews from Paul Singer, Seth Klarman, Jim Grant, Bill Fleckenstein, etc. and learn from them. They are well worth the education. Good luck!

Comment   |  Flag   |  Nov 13, 2013 from Knoxville, TN

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Thomas Larsen Level 5

An investment in gold should occupy no more than 5% if a diversified portfolio of stocks and bonds. Gold offers no interest payment and no dividend. Many investors achieve their goals without allocating any capital to gold, but some just can not resist speculating on its price.

1 Comment   |  Flag   |  Dec 05, 2014 from Vail, CO
Steve Casull

Exactly, Thomas! I'm at a 3% allocation in client accounts, and I even cringe at that high of allocation. Now I did hear about GOOGLE's new teleportation device that requires 1000 ounces of gold for each device. When you take into account all of the shipping docks and warehouses in the world all needing many devices
, gold could climb in the future...Naturally I am kidding about any "teleportation device" and the need of said device for "1000 ounces" of gold. I wonder if this can turn into a FINRA violation. Or worse, "BREAKING NEWS" on Squak Box...

Flag |  Jan 29, 2015 near South Jordan, UT

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Peter Cacioppo Level 16

No, as it is not an investment. If you are worth 2 million or more, perhaps you could take say 100,000 and speculate (i.e., not invest) that at a certain dollar value you think (i.e. guess) it will go up in value.

Comment   |  Flag   |  Dec 26, 2014 from La Jolla, CA

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We don't put any of our clients' money in gold specifically. Instead, we believe they are already exposed to it as an asset class by investing in the general market. e.g. The S&P500 has gold and other natural resource stocks in it's index. If you are buying physical gold or trying to pick individual gold stocks you are speculating and we believe taking unnecessary risks.

Comment   |  Flag   |  Dec 30, 2014 from Minneapolis, MN

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In my professional Opinion, I like investments that pay dividends and gold is not one of them. Each their own but the only gold my clients have is cufflinks and wedding rings.

Comment   |  Flag   |  Jul 13, 2015 from Brunswick, ME

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