I Thought Gold Would Fare Better in 2022-23

[dualstow]

Indeed, gold is crap. Haven't met my expectations.
However, given that I am posting to gyroscopic and not windmill investing, have to give a credit to the folks on which shoulders I have stepped and admit I am keeping the course. My US PP is not changed since I started in 2019 (just rebalanced), and its a good portion of my savings/investments.
Well, my EU GB/PP got slaughtered even worse by changing the AA meanwhile. Its performance is abysmal also due to the fact inflation is much higher in EU and the rates did not hike accordingly. In Bulgaria for example you can get 4-5% only by investing in P2P lending - well, prime-class clients, but still there is a risk premia.
Half joke, half truth - IMHO there are 2 ways to cope with high inflation - a) have a business that forwards the inflation effects to its direct customers (and as very common practice exaggerate that effect for even more profit), and b) write financial books on how to beat the inflation...

Having said that, I am fed up reading FI books, given my performance I haven't fully understood the ones I have read and chances are very thin that I will ever understand them. Actually, last book I read on financial topics was the one written by BelangP and with a light sense of irony - I guess his portfolio is not doing extremely well those days .....

Vil, I keep reading about the slow but significant dedollarization coming to the world.
I wonder if that will change things for gold.

[Smith1776]

I think gold will still have relevance in the decades to come.

I don't see Bitcoin being a threat to gold so much as it is a complement. Gold has long stood alongside silver and copper, as an example. I think Bitcoin and maybe a couple other cryptocurrencies have simply enlarged our set of viable options.

[Hal]

Having said that, I am fed up reading FI books, given my performance I haven't fully understood the ones I have read and chances are very thin that I will ever understand them. Actually, last book I read on financial topics was the one written by BelangP and with a light sense of irony - I guess his portfolio is not doing extremely well those days .....

Hi Vil,
You got me curious and checked the BelangP portfolio for the US. Note that he said a non-US BelangP allocation does much worse....
He does seem to have vanished though. Even his interviews on another site are gone.

That said, the GoldSmith PP has done well in Australia, with Gold being the saviour.

Anyway hope you are doing well. Remember Marc Fabers adage. "In a world of the blind, the one eyed man is King."
So if you lose half as much as everyone else, you will be King Vil

[barrett]

Back when kbg was posting on here (I wish he still were), he would often point out that gold was getting weaker or stronger mainly due to which way the US Dollar Index was moving. This data only goes back to 1/1/2000 but is probably worth a look:

https://en.macromicro.me/collections/45 ... gold-price

And this page on the Kitco site is worth reading:

https://www.kitco.com/kitco-gold-index.html

In part it says:

"The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value."

Also from that same page which I did not know (I always thought more currencies were in the index):

"The U.S. Dollar Index® represents the value of the US Dollar in terms of a basket of six major foreign currencies: Euro (57.6%), Japanese Yen (13.6%), UK Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%) and Swiss Franc (3.6%). It is an exchange traded (FINEX) index and has become a standard used worldwide."

I've been invested in gold now since the beginning of 2014 and it's done reasonably well overall, just not when I would have expected it to do so. As others on here have bemoaned, it frequently seems to do well at the same time as stocks & bonds, and vice versa. Today is a good example where - at least as I write this - all three are up. So it seems we're not getting the diversification we had hoped for. But maybe I am just unable to mentally zoom out and look at a longer timeframe.

Anyway, I am at about 17% gold and moving toward 15% which seems about right to me. I do like having a hard asset other than our home. And it's more portable than, say, our garage.

[vnatale]

Back when kbg was posting on here (I wish he still were), he would often point out that gold was getting weaker or stronger mainly due to which way the US Dollar Index was moving. This data only goes back to 1/1/2000 but is probably worth a look:

https://en.macromicro.me/collections/45 ... gold-price

And this page on the Kitco site is worth reading:

https://www.kitco.com/kitco-gold-index.html

In part it says:

"The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value."

Also from that same page which I did not know (I always thought more currencies were in the index):

"The U.S. Dollar Index® represents the value of the US Dollar in terms of a basket of six major foreign currencies: Euro (57.6%), Japanese Yen (13.6%), UK Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%) and Swiss Franc (3.6%). It is an exchange traded (FINEX) index and has become a standard used worldwide."

I've been invested in gold now since the beginning of 2014 and it's done reasonably well overall, just not when I would have expected it to do so. As others on here have bemoaned, it frequently seems to do well at the same time as stocks & bonds, and vice versa. Today is a good example where - at least as I write this - all three are up. So it seems we're not getting the diversification we had hoped for. But maybe I am just unable to mentally zoom out and look at a longer timeframe.

Anyway, I am at about 17% gold and moving toward 15% which seems about right to me. I do like having a hard asset other than our home. And it's more portable than, say, our garage.

Good piece of humor!

[dualstow]

It may be be the one thing an identity thief can’t take.

[Smith1776]

And it's more portable than, say, our garage.

Depends on how much gold we're talking about!!

[vnatale]

Two gold related articles:

https://www.msnbc.com/opinion/msnbc-opi ... rcna100685

https://www.washingtonpost.com/business ... ive-media/

I found these two articles here:

https://ritholtz.com/2023/08/sunday-reads-338/

I find Ritholtz daily (7 days a week) recommending many valuable and interesting articles. You can see that he also recommended 10 other articles that day (with descriptions) which I think many here would find of interest.

Here was the description for the above two articles:

• A shiny scheme is draining retirement accounts. Right-wing media enables it. We’ve been following these companies for years. And the picture that emerged from our research was alarming. (MSNBC) see also How right-wing news powers the ‘gold IRA’ industry: Ads for gold coins have become a mainstay on Fox News, Newsmax and other conservative outlets, even as regulators have accused some companies of defrauding elderly clients. (Washington Post)

Here are the next two articles recommended after those two:

• The Secret Weapon Hackers Can Use to Dox Nearly Anyone in America for $15: Most Americans have very little choice but to provide their personal information to credit bureaus. Hackers have found a way into that data supply chain, and are advertising access in group chats used by violent criminals who rob, assault, and shoot targets. (404 Media)

• Deepfake Imposter Scams Are Driving a New Wave of Fraud: AI could turbocharge the cybertheft economy. The world’s banking industry is scrambling to contain the risk. (Bloomberg)

[vnatale]

Also related to gold:

https://money.com/best-gold-etfs/?utm_s ... aily_money

INVESTING
GOLD
Best Gold ETFs of 2023

By: Noel Dávila
Editor: Alison Tobin
Published: Aug 29, 202310 min read

[mathjak107]

gold is the dollars competitor .

as long as the dollar is strong a crises is going to see the dollar win over gold as the place to be

[seajay]

Back when kbg was posting on here (I wish he still were), he would often point out that gold was getting weaker or stronger mainly due to which way the US Dollar Index was moving. This data only goes back to 1/1/2000 but is probably worth a look:

https://en.macromicro.me/collections/45 ... gold-price

And this page on the Kitco site is worth reading:

https://www.kitco.com/kitco-gold-index.html

In part it says:

"The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value."

Also from that same page which I did not know (I always thought more currencies were in the index):

"The U.S. Dollar Index® represents the value of the US Dollar in terms of a basket of six major foreign currencies: Euro (57.6%), Japanese Yen (13.6%), UK Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%) and Swiss Franc (3.6%). It is an exchange traded (FINEX) index and has become a standard used worldwide."

I've been invested in gold now since the beginning of 2014 and it's done reasonably well overall, just not when I would have expected it to do so. As others on here have bemoaned, it frequently seems to do well at the same time as stocks & bonds, and vice versa. Today is a good example where - at least as I write this - all three are up. So it seems we're not getting the diversification we had hoped for. But maybe I am just unable to mentally zoom out and look at a longer timeframe.

Anyway, I am at about 17% gold and moving toward 15% which seems about right to me. I do like having a hard asset other than our home. And it's more portable than, say, our garage.

Sooner or later any fiat currency inevitably declines relative to gold

[mathjak107]

when we look at gold priced in other currencies it did pretty well against some of them .


in india as an example

Gold Returns

The return from gold from 20 years has been 12%, whereas, in 15 and 10 years, it has been 10.3% and 7.5% respectively. Interestingly, in one year, Gold has outperformed all asset classes with 14.2% returns compared to 12.9% from Indian equities and 9.5% from US equities.


https://www.financialexpress.com/money/ ... s/3126741/#

[welderwannabe]

Exactly. Our Fed got aggressive with rate increases quicker than the rest of the world (in fact we are still far ahead of most) and that provided strength to the dollar relative to other currencies. This kept gold muted as measured against USD.

That all said, I am more than happy with Gold's performance in my portfolio over the last 3-4 years. It has done far better than my LTTs.

My portfolio isnt really a PP anyways, im a total poser. I keep my cash separate, and basically do a 60/20/20 (60% equities, 20% LTT, 20% gold).

[Jack Jones]

I think gold will still have relevance in the decades to come.

I don't see Bitcoin being a threat to gold so much as it is a complement. Gold has long stood alongside silver and copper, as an example. I think Bitcoin and maybe a couple other cryptocurrencies have simply enlarged our set of viable options.

I agree.

I don't think about gold's price much. To me it's about having wealth outside the system that no one knows about. When the music stops, it's my chair.

[Smith1776]

I think gold will still have relevance in the decades to come.

I don't see Bitcoin being a threat to gold so much as it is a complement. Gold has long stood alongside silver and copper, as an example. I think Bitcoin and maybe a couple other cryptocurrencies have simply enlarged our set of viable options.

I agree.

I don't think about gold's price much. To me it's about having wealth outside the system that no one knows about. When the music stops, it's my chair.

Nicely put.

[dualstow]

Jack, that is one of the reasons I decided to go all physical (the other being the lack of forms and reporting until I actually sell).
I was thinking about it this week when I was feeding cash into a bank account that was being double-charged for something for a while before I caught it (don’t ask).

The gold is air-gapped and mostly untouchable.

And as I always say, you don’t have to spray for silverfish like Skyler White.

[seajay]

I think gold will still have relevance in the decades to come.

I don't see Bitcoin being a threat to gold so much as it is a complement. Gold has long stood alongside silver and copper, as an example. I think Bitcoin and maybe a couple other cryptocurrencies have simply enlarged our set of viable options.

That's the same as saying the USD will still have relevance in the decades to come.

In 1934 the US Treasury bought up/nationalized all American investment gold, 8000 tons. The Fed are the Custodians for that and have gold certificates issued by the Treasury at $42.2222/ounce. The Fed can't redeem those for gold, but it can use that as collateral. At a $2000/ounce market price of gold that's 47x leverage factor, the equivalent of the Fed having nearly 380,000 tons of gold. That's enough ammo for the Fed to keep the price of gold aligned to the dollar (or if you prefer, the dollar aligned to the price of gold).

Take a bunch of currencies, DXY, and set policies to keep the USD somewhat central to that, combined with somewhat being aligned to the price of gold, and that prevails as a internationally accepted trade currency. A more dynamic form of the old gold standard without having to shift bars of gold around.

Bitcoin is just a subset currency, no different to any other. The bitcoin network is predominately suited to illicit activities, more likely the likes of Ethereum will rise to being the primary, Bitcoin legislated out. Unlike bitcoin the Ethereum network is more like a network of programs rather than just a network of records, you can for instance program a transaction to either be accepted or rejected subject to other criteria. Ethereum is also already becoming the accepted 'regulated' (official) network.

Bitcoin isn't a threat to gold, as that's no different to Bitcoin being a threat to the USD. Such a battle has a guaranteed sure winner.

[jalanlong]

https://www.usfunds.com/resource/centra ... r-in-2023/


This is after record purchases in 2022. Are there any reasons to explain these purchases besides them knowing something we don’t know?

[seajay]

https://www.usfunds.com/resource/centra ... r-in-2023/

This is after record purchases in 2022. Are there any reasons to explain these purchases besides them knowing something we don’t know?

Mostly Russia, China, Turkey, Singapore.

Perhaps preferring to buy gold rather than US dollars, or in Russia's case no other option other than to buy gold due to sanctions, perhaps being bought via China, Singapore and Turkey.

[Hal]

This caught my attention while poking around Tylers site! Obviously Gold was not much use in Spain in the 70's. If you used 50% 10year bonds to more closely approximate long term bonds the results were even worse.

[ochotona]

Can you imagine how well you would have done if you'd bought real estate in Spain in the 1970s, right after Franco's death? Or in Croatia or Slovenia after Tito's death? WOW. In those cases, who needs gold?

I was wondering if a similar situation exists in Ukraine. But that trade is for Ukrainian-Americans with connections. Not me.

[Smith1776]

This caught my attention while poking around Tylers site! Obviously Gold was not much use in Spain in the 70's. If you used 50% 10year bonds to more closely approximate long term bonds the results were even worse.

OUCH!

I think this really highlights the importance of global diversification.

[Hal]

OUCH!

I think this really highlights the importance of global diversification.

Hi Smithy!
As an aside here is the drawdown with Spanish Shares replaced by Developed World TSM. So 50% of the portfolio is not linked to the Spanish currency. Still would hurt if you just retired! The drawdown drops to 17% if the bonds are replaced by UNHEDGED Developed world bonds. Bit better I think.

Any way to model how the All Terrain Portfolio would do if the currency took a major dive?

[barrett]

https://www.usfunds.com/resource/centra ... r-in-2023/

This is after record purchases in 2022. Are there any reasons to explain these purchases besides them knowing something we don’t know?

Mostly Russia, China, Turkey, Singapore.

Perhaps preferring to buy gold rather than US dollars, or in Russia's case no other option other than to buy gold due to sanctions, perhaps being bought via China, Singapore and Turkey.

Of the countries seajay mentions from the article, Turkey is the one that I have the most experience with as a traveler. I went there five times between 1996 & 2005 and will go back next week. From 1996 to 2004 the Turkish Lira went from 80,000 for one USD to 1,600,000 for one USD, or a total devaluation (against a steadily but slowly devaluing USD) of about 95%. Between my 2004 & 2005 visits, Turkey transitioned to what they were calling the New Turkish Lira (YTL) and they attempted to more or less peg that to the Euro for a time. That was back when the Turks were still hopeful of gaining EU membership.

Anyway, since 2005 the Turkish Lira has lost roughly another 95% of its value relative to the USD. So inflation has been brutally high in Turkey for at least three decades. Not sure how (non-wealthy) Turkish citizens have handled this but it makes absolute sense that the Turkish government would want to hold hard assets.

In the case of China, it's my understanding that their USD holdings (I believe mostly US Treasuries) have shrunk by about 25%... that they are not necessarily dumping USD but instead just not making new purchases (and maybe buying some physical gold instead).

[Smith1776]

Hi Smithy!
As an aside here is the drawdown with Spanish Shares replaced by Developed World TSM. So 50% of the portfolio is not linked to the Spanish currency. Still would hurt if you just retired! The drawdown drops to 17% if the bonds are replaced by UNHEDGED Developed world bonds. Bit better I think.

Any way to model how the All Terrain Portfolio would do if the currency took a major dive?

Very good question! I will need to do some modelling work so that I can make my book as detailed as possible!