Why isn't gold moving?

Discussion of the Gold portion of the Permanent Portfolio

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drumminj
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Re: Why isn't gold moving?

Post by drumminj » Thu Apr 22, 2021 6:37 pm

Let's look on the bright side here -- coffee prices are still reasonable!!
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I Shrugged
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Re: Why isn't gold moving?

Post by I Shrugged » Thu Apr 22, 2021 7:18 pm

Well a year ago was a dark outlook.
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Tortoise
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Re: Why isn't gold moving?

Post by Tortoise » Thu Apr 22, 2021 8:31 pm

buddtholomew wrote:
Thu Apr 22, 2021 4:38 pm
“Jumping from the frying pan and into the fire” comes to mind when considering a switch from LTT to stocks. Perhaps consider shortening duration and choosing something in the 5-7 or 7-10 year range.
Inflation is not guaranteed and printing certainly hasn’t resulted in much over the last 13 years.
I did consider shortening the duration of my bond allocation as you suggested, but I don't know if I'm sold on that idea yet.

Basically, I view the PP's LTT allocation as providing two main benefits:
  • Return (appreciation and interest)
  • Volatility
The volatility benefit has been, and continues to be, good. That hasn't changed.

It's the return benefit that has changed. Coupon payments are now quite low, which simultaneously means the potential appreciation has dwindled significantly.

While I think the LTT piece will continue to provide a helpful smoothing effect on the PP's returns going forward, it seems like its contribution to the PP's overall long-term return is going to shrink. When the maximum upside is ~70%, how could it not?

As for ITTs, they do mitigate the problem of unlimited downside, but they don't solve the problem of limited upside.
whatchamacallit wrote:
Thu Apr 22, 2021 4:48 pm
This must mean the PP's time to shine is soon.

Sentiment is so low for gold and bonds.

I too am having a harder time stomaching it while also just wanting to simplify.

If you are still accumulating then just leave what you have in place and just put new contributions in preferred assets.

That is my plan. Then if there is a big drop that comes to this never ending bull market you can go all in then.

I was thinking if LTT got close to 5% I would go almost all in on them. I don't know what price gold would have to be for an all in.
My sentiment for gold is actually very high. It's only low for bonds. I look at the graph of LTT interest rates for the past 30 years and see a mostly straight line going down, down, down -- now approaching zero. I just don't see that long-term trend continuing for much longer. Even if LTT rates don't go back up significantly, and they bounce around for years, LTTs would continue to provide volatility but not long-term return. They would basically become little more than a "volatility dampener" for the PP.

As for the plan of jumping into stocks after a big drop, that's great if it pans out. But if stocks continue to achieve all-time highs for the next five years, climbing to even more dizzying heights before we finally see a big drop, that plan might not look so great. As the saying goes, "Markets can remain irrational longer than you can remain solvent."
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vnatale
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Re: Why isn't gold moving?

Post by vnatale » Fri Apr 23, 2021 9:25 am

Tortoise wrote:
Thu Apr 22, 2021 8:31 pm

buddtholomew wrote:
Thu Apr 22, 2021 4:38 pm

“Jumping from the frying pan and into the fire” comes to mind when considering a switch from LTT to stocks. Perhaps consider shortening duration and choosing something in the 5-7 or 7-10 year range.
Inflation is not guaranteed and printing certainly hasn’t resulted in much over the last 13 years.


I did consider shortening the duration of my bond allocation as you suggested, but I don't know if I'm sold on that idea yet.

Basically, I view the PP's LTT allocation as providing two main benefits:

  • Return (appreciation and interest)

  • Volatility



The volatility benefit has been, and continues to be, good. That hasn't changed.

It's the return benefit that has changed. Coupon payments are now quite low, which simultaneously means the potential appreciation has dwindled significantly.

While I think the LTT piece will continue to provide a helpful smoothing effect on the PP's returns going forward, it seems like its contribution to the PP's overall long-term return is going to shrink. When the maximum upside is ~70%, how could it not?

As for ITTs, they do mitigate the problem of unlimited downside, but they don't solve the problem of limited upside.

whatchamacallit wrote:
Thu Apr 22, 2021 4:48 pm

This must mean the PP's time to shine is soon.

Sentiment is so low for gold and bonds.

I too am having a harder time stomaching it while also just wanting to simplify.

If you are still accumulating then just leave what you have in place and just put new contributions in preferred assets.

That is my plan. Then if there is a big drop that comes to this never ending bull market you can go all in then.

I was thinking if LTT got close to 5% I would go almost all in on them. I don't know what price gold would have to be for an all in.


My sentiment for gold is actually very high. It's only low for bonds. I look at the graph of LTT interest rates for the past 30 years and see a mostly straight line going down, down, down -- now approaching zero. I just don't see that long-term trend continuing for much longer. Even if LTT rates don't go back up significantly, and they bounce around for years, LTTs would continue to provide volatility but not long-term return. They would basically become little more than a "volatility dampener" for the PP.

As for the plan of jumping into stocks after a big drop, that's great if it pans out. But if stocks continue to achieve all-time highs for the next five years, climbing to even more dizzying heights before we finally see a big drop, that plan might not look so great. As the saying goes, "Markets can remain irrational longer than you can remain solvent."



Mathjak has similarly many times pointed this out to us...
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Why isn't gold moving?

Post by jalanlong » Fri Apr 23, 2021 1:28 pm

Tortoise wrote:
Thu Apr 22, 2021 8:31 pm
buddtholomew wrote:
Thu Apr 22, 2021 4:38 pm
“Jumping from the frying pan and into the fire” comes to mind when considering a switch from LTT to stocks. Perhaps consider shortening duration and choosing something in the 5-7 or 7-10 year range.
Inflation is not guaranteed and printing certainly hasn’t resulted in much over the last 13 years.
I did consider shortening the duration of my bond allocation as you suggested, but I don't know if I'm sold on that idea yet.

Basically, I view the PP's LTT allocation as providing two main benefits:
  • Return (appreciation and interest)
  • Volatility
The volatility benefit has been, and continues to be, good. That hasn't changed.

It's the return benefit that has changed. Coupon payments are now quite low, which simultaneously means the potential appreciation has dwindled significantly.

While I think the LTT piece will continue to provide a helpful smoothing effect on the PP's returns going forward, it seems like its contribution to the PP's overall long-term return is going to shrink. When the maximum upside is ~70%, how could it not?

As for ITTs, they do mitigate the problem of unlimited downside, but they don't solve the problem of limited upside.
whatchamacallit wrote:
Thu Apr 22, 2021 4:48 pm
This must mean the PP's time to shine is soon.

Sentiment is so low for gold and bonds.

I too am having a harder time stomaching it while also just wanting to simplify.

If you are still accumulating then just leave what you have in place and just put new contributions in preferred assets.

That is my plan. Then if there is a big drop that comes to this never ending bull market you can go all in then.

I was thinking if LTT got close to 5% I would go almost all in on them. I don't know what price gold would have to be for an all in.
My sentiment for gold is actually very high. It's only low for bonds. I look at the graph of LTT interest rates for the past 30 years and see a mostly straight line going down, down, down -- now approaching zero. I just don't see that long-term trend continuing for much longer. Even if LTT rates don't go back up significantly, and they bounce around for years, LTTs would continue to provide volatility but not long-term return. They would basically become little more than a "volatility dampener" for the PP.

As for the plan of jumping into stocks after a big drop, that's great if it pans out. But if stocks continue to achieve all-time highs for the next five years, climbing to even more dizzying heights before we finally see a big drop, that plan might not look so great. As the saying goes, "Markets can remain irrational longer than you can remain solvent."
I have skepticism for 3 of the 4 components really. Having 25% of my portfolio in cash giving me a negative real return doesnt seem so prudent. I know that historically cash has kept up with inflation but it has not in the past 12 years and the Fed seems in no hurry to make that happen again. As Tortoise said, the upside for long bonds is limited, the downside could be tremendous and really it serves only as a rebalancing asset and only so much can be gained from that. Gold is a wild card. It doesnt always move the way you would expect and to a certain extent it also serves as a rebalancing asset.

As for diving all in on stocks right now, it certainly is a gamble. If you do that and a 30% correction comes in the next year then history says it will take you at least 4 years to crawl your way back up to what you would have had if you stayed in the PP. However, if stocks keep going up and a 30% correction doesn't come for another 3 or 4 years, then you will be so far ahead of the PP that even a correction won't put you behind. Just random thoughts I have been having whilst holding a "sleep at night" PP portfolio!
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I Shrugged
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Re: Why isn't gold moving?

Post by I Shrugged » Fri Apr 23, 2021 2:10 pm

Another way of saying the Fed is in control, and we have to pick our poison. I doubt HB war gamed this scenario. But I still can't find comfort in anything substantially different.
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Re: Why isn't gold moving?

Post by jhogue » Fri Apr 23, 2021 4:25 pm

@jalanlong:

As Ayn Rand used to say, you need to examine your premises:

There isn't anything imprudent about a 25% cash position. At most, a small negative real yield on cash is a premium paid for liquidity. At least, there are strategies available to achieve and maintain a positive real yield on cash.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Why isn't gold moving?

Post by whatchamacallit » Sat Apr 24, 2021 11:59 am

Good explanation on incentive for short term gold price manipulation from belangp.

https://www.youtube.com/watch?v=DWjyxhaaNnQ
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Re: Why isn't gold moving?

Post by gaddyslapper007 » Thu Apr 29, 2021 11:12 am

The inflation is flowing into commodities we need (like oil, lumber & copper), assets the government supports (sovereign, corporate, & residential debt), & rapidly growing technology that is reshaping our world (FAANG, #Bitcoin). Gold & silver don't check any of these boxes. - Michael Saylor


https://twitter.com/michael_saylor/stat ... 5186976770
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Re: Why isn't gold moving?

Post by flyingpylon » Thu Apr 29, 2021 11:52 am

gaddyslapper007 wrote:
Thu Apr 29, 2021 11:12 am
The inflation is flowing into commodities we need (like oil, lumber & copper), assets the government supports (sovereign, corporate, & residential debt), & rapidly growing technology that is reshaping our world (FAANG, #Bitcoin). Gold & silver don't check any of these boxes. - Michael Saylor


https://twitter.com/michael_saylor/stat ... 5186976770
How are price increases due to supply shock being factored in? I'm not sure it's all inflation.
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Re: Why isn't gold moving?

Post by StinkyToes » Fri May 07, 2021 3:18 am

Gold is up 4.5 percent in the last 30 days. Copper, lumber, food, and other commodity prices are rising. The statistics may not show it yet, but rents are rising aggressively in desirable cities.
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Re: Why isn't gold moving?

Post by I Shrugged » Fri May 07, 2021 8:05 am

StinkyToes wrote:
Fri May 07, 2021 3:18 am

The statistics may not show it yet, but rents are rising aggressively in desirable cities.
Where? Not doubting, just asking because the impression I've gotten from the housing market is that the bidding wars are fueled by people leaving cities.
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Re: Why isn't gold moving?

Post by StinkyToes » Fri May 07, 2021 9:47 am

I Shrugged wrote:
Fri May 07, 2021 8:05 am
StinkyToes wrote:
Fri May 07, 2021 3:18 am

The statistics may not show it yet, but rents are rising aggressively in desirable cities.
Where? Not doubting, just asking because the impression I've gotten from the housing market is that the bidding wars are fueled by people leaving cities.
Mostly in mid-sized cities and in the suburbs surrounding cities.

Boise:
https://idahobusinessreview.com/welcome ... ise-again/

Austin:
https://twitter.com/nevmed/status/1388531179561930753
https://twitter.com/cjrhind/status/1387034468989521920

Raleigh:
https://twitter.com/SpecNews1Triad/stat ... 5753602053

Las Vegas:
https://www.fox5vegas.com/coronavirus/t ... 5af7b.html
https://www.costar.com/article/11761273 ... -las-vegas


Tucson:
https://azbigmedia.com/real-estate/mult ... ts-in-u-s/
https://tucson.com/business/rents-on-th ... 84a82.html
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I Shrugged
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Re: Why isn't gold moving?

Post by I Shrugged » Fri May 07, 2021 3:25 pm

Thanks!
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Dieter
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Re: Why isn't gold moving?

Post by Dieter » Fri May 07, 2021 8:41 pm

Sorry folks, gold will be going down (I just did a rebalance to add a little into Gold).
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Re: Why isn't gold moving?

Post by Kriegsspiel » Fri May 07, 2021 9:54 pm

I just bought a fuckload of stocks, so maybe it will balance out.
"You haven't, I suppose, ever mixed with politicians at close quarters. They're awful. I think some of these must have been the dregs anyhow, but I've discovered, what previously I didn't believe possible, that politicians behave in private life and say exactly the same things as they do in public. Their stupidity is inhuman.
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Re: Why isn't gold moving?

Post by I Shrugged » Sat May 08, 2021 4:10 pm

Kriegsspiel wrote:
Fri May 07, 2021 9:54 pm
I just bought a fuckload of stocks, so maybe it will balance out.
You’re a better man than I am, Gunga Din.
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Re: Why isn't gold moving?

Post by Dieter » Sat May 08, 2021 10:05 pm

Kriegsspiel wrote:
Fri May 07, 2021 9:54 pm
I just bought a fuckload of stocks, so maybe it will balance out.
Well, I did take a little out of stock, so if you help it go down for a bit, I'll feel smartererer

Thanks!
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Re: Why isn't gold moving?

Post by murphy_p_t » Sat May 08, 2021 11:13 pm

Well, gold is up about a hundred bucks off recent low... And some senior producers are up 10 to 20% off their recent lows...
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buddtholomew
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Re: Why isn't gold moving?

Post by buddtholomew » Wed May 12, 2021 8:28 am

First sign of inflation and gold runs like a scared chicken with its head cut-off. Up 5% in the last month after a 20% pull-back isn’t very comforting (just like the PP overall).

I bought more at the recent lows after selling at the highs.
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Re: Why isn't gold moving?

Post by mathjak107 » Wed May 12, 2021 5:53 pm

buddtholomew wrote:
Wed May 12, 2021 8:28 am
First sign of inflation and gold runs like a scared chicken with its head cut-off. Up 5% in the last month after a 20% pull-back isn’t very comforting (just like the PP overall).

I bought more at the recent lows after selling at the highs.
Gold isn’t going to be an asset of choice with only 4% inflation….gold is best for high inflation when real returns are negative on lots of assets
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