Gold is not an investment

Discussion of the Gold portion of the Permanent Portfolio

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whatchamacallit
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Re: Gold is not an investment

Post by whatchamacallit » Mon Jul 18, 2022 10:51 pm

I hate gold but still haven't found anything to replace it.

I would love to be able to just swap it for something like a total international fund but it just doesn't perform the same historically.
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Re: Gold is not an investment

Post by dockinGA » Tue Jul 19, 2022 5:31 am

Kbg wrote:
Mon Jul 18, 2022 5:17 pm
Not quite MJ.

Per PV...

As a general rule on several average rolling year computations equities outperform gold 1.5 to 2x in CAGR (gold lovers...this should get your attention)

For the last 3 years rolling equites/gold 9.52/8.54%

For the last 5 years rolling equities/gold 10.48/7.31%
You're correct about the rolling numbers for the respective investments, but there is a diversification benefit to holding a mix of gold and stocks that can't be ignored. PV links below for both 3 and 5 year holding periods. For 3 years a 50/50 mix actually beats 100% equities in this particular backtest.

https://www.portfoliovisualizer.com/bac ... tion2_3=50
https://www.portfoliovisualizer.com/bac ... tion2_3=50

I should also note that I hate gold....
Jack Jones
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Re: Gold is not an investment

Post by Jack Jones » Tue Jul 19, 2022 12:40 pm

Hansel wrote:
Fri Jul 15, 2022 7:52 am
"If you consider the possible outcome of our Government failing to handle inflation, the gold prices will also skyrocket. I know that gold was always a reliable source of investment, but it gives a little reward for your investment price.
This seems like an AI-generated response, but I'll respond!

I think we're at 1975 on this chart:
historical-gold-prices-100-year-chart-2022-07-17-macrotrends.png
historical-gold-prices-100-year-chart-2022-07-17-macrotrends.png (156.42 KiB) Viewed 1803 times
investopedia wrote:The Great Inflation was blamed on oil prices, currency speculators, greedy businessmen, and avaricious union leaders. However, it is clear that monetary policies that financed massive budget deficits and were supported by political leaders were the cause.
Sound familiar? It lasted a decade while the powers that be tinkered at the periphery, e.g. removing food and energy from the CPI. Are we to believe that the current leaders will do any better?
The Chips Act authorizes about $52 billion in grants and loans for chip manufacturers, as well as a new, four-year 25% investment tax credit for chip making.
Wait, weren't they supposed to be containing inflation?

One major difference between then and now is that there were stronger currencies than the dollar back then, e.g. the swiss franc.

https://www.investopedia.com/articles/e ... lation.asp
Kbg
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Re: Gold is not an investment

Post by Kbg » Tue Jul 19, 2022 6:43 pm

dockinGA wrote:
Tue Jul 19, 2022 5:31 am
Kbg wrote:
Mon Jul 18, 2022 5:17 pm
Not quite MJ.

Per PV...

As a general rule on several average rolling year computations equities outperform gold 1.5 to 2x in CAGR (gold lovers...this should get your attention)

For the last 3 years rolling equites/gold 9.52/8.54%

For the last 5 years rolling equities/gold 10.48/7.31%
You're correct about the rolling numbers for the respective investments, but there is a diversification benefit to holding a mix of gold and stocks that can't be ignored. PV links below for both 3 and 5 year holding periods. For 3 years a 50/50 mix actually beats 100% equities in this particular backtest.

https://www.portfoliovisualizer.com/bac ... tion2_3=50
https://www.portfoliovisualizer.com/bac ... tion2_3=50

I should also note that I hate gold....
Yes there is, but I've come around to the opinion gold is just like options or other hedges in that you get protection for a net cost. What one does is not right or wrong, just a risk preference and an option for hedging (one among many).

I can say this board has completely de-emotionalized me on gold as it caused me to study it quite in-depth and now I just think of it as an asset class with its own characteristics.
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Re: Gold is not an investment

Post by Jack Jones » Fri Jul 22, 2022 8:52 am

Jack Jones wrote:
Tue Jul 19, 2022 12:40 pm
I think we're at 1975 on this chart:
Here we go!
Screen Shot 2022-07-22 at 9.50.57 AM.png
Screen Shot 2022-07-22 at 9.50.57 AM.png (103.06 KiB) Viewed 1673 times
Who's on board?

2022 is the year of gold. O0
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Re: Gold is not an investment

Post by dualstow » Fri Jul 22, 2022 9:11 am

🙋‍♂️
Sam Bankman-Fried sentenced to 25 years
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Re: Gold is not an investment

Post by dualstow » Fri Jul 22, 2022 2:15 pm

Trying to keep the faith, Desert O0
Sam Bankman-Fried sentenced to 25 years
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seajay
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Re: Gold is not an investment

Post by seajay » Thu Jul 28, 2022 11:28 am

mathjak107 wrote:
Fri Jul 15, 2022 8:55 am
Gold is a competitor to the dollar and also bonds , not equites
A new retiree initially loading 50/50 stock/gold, non-rebalanced, spending gold first - as though cash/T-Bills, historically tended to see that gold last relatively few years, 7 or so (4% SWR), as per 1980 start date, or many years, 22 or so as per 1972, or more often somewhere between (12 years).

50/50 transitions to 100/0, averages 75/25, and where stock total return accumulation during the years gold was being spent tends to counter-balance the portfolio. If gold only lasted 7 years (did poorly) so stocks stocks did very well; If gold lasted many years, then stocks again did OK.

On average, with gold lasting 12 years, so stocks typically gained 6% real, saw the 50 stock value double to 100, whilst the 50 gold value was spent, such that after 4% SWR you ended 12 years later still with around the same inflation adjusted start date portfolio value available.

Unlike T-Bills that tend to inflation protect only the amount invested into T-Bills, gold had tended to have a multi-year counter cycle to stocks.
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