Should €-Investors hedge Gold against $?

[happyspec]

HB states in his books that investors should invest primarily in their own currency. So American investors should buy primarily U.S. stocks while Europeans should at least have a good exposure to the European market? How about gold? It trades in $ - should investors from other world regions hedge their gold investment against the Dollar? Thank you for your answers. 

[LazyInvestor]

You should be buying physical gold. Not ETFs, and especially not some hedged ETFs.

I am skeptical towards non-US PP. HB stated clearly that during the crisis people run to USD. Only once USD is in trouble they run to gold. Your country currency might be in trouble, while USD doing great, so you keeping the gold during such times might not be optimal. Also, many countries have small equity markets, less reliable governments for bond allocation than US government, and so on. I'd rather go with a Bogleheads portfolio in such countries, unless you have really mastered and understood all the aspects of the economy and PP up to a point that you are super confident about what you are doing.

[gizmo_rat]

You should be buying physical gold. Not ETFs, and especially not some hedged ETFs.

Also, many countries have small equity markets, less reliable governments for bond allocation than US government, and so on. I'd rather go with a Bogleheads portfolio in such countries...

Reading through the Icelandic experience might be instructive.

http://gyroscopicinvesting.com/forum/pe ... /#msg20183

[happyspec]

You should be buying physical gold. Not ETFs, and especially not some hedged ETFs.

It's clear: nothing else than physical gold, there's no question about that for me. But you could hedge it with a currency option.

I am skeptical towards non-US PP. HB stated clearly that during the crisis people run to USD. Only once USD is in trouble they run to gold. Your country currency might be in trouble, while USD doing great, so you keeping the gold during such times might not be optimal.

I'm living in Germany and although we are in the Euro-Zone we have a big government bond market. As you will have noted Germany pays less interest that does the U.S. This means that a lot of money is flowing into the German bond market because investors consider it as secure. What do others say concerning skepticism toward non-US PP?

[LazyInvestor]

You should be buying physical gold. Not ETFs, and especially not some hedged ETFs.

It's clear: nothing else than physical gold, there's no question about that for me. But you could hedge it with a currency option.

Can you explain why would you do that exactly? I thought you'd do that because you realized that USD is reserve currency and because of some particular relationship between USD and gold that you are having in your mind. If you are buying physical gold, and you can buy and sell in your local market in EUR, then who cares about USD?!

I am skeptical towards non-US PP. HB stated clearly that during the crisis people run to USD. Only once USD is in trouble they run to gold. Your country currency might be in trouble, while USD doing great, so you keeping the gold during such times might not be optimal.

I'm living in Germany and although we are in the Euro-Zone we have a big government bond market. As you will have noted Germany pays less interest that does the U.S. This means that a lot of money is flowing into the German bond market because investors consider it as secure. What do others say concerning skepticism toward non-US PP?

If you are confident about the currency, German government, stock market, and you can argue about the specific behavior of the PP components with respect to the economic climates in Germany, then do make a German PP. Note, when you buy all the components of the PP, EUR becomes rather irrelevant. You own German government debt, equity, and gold. You don't own Euros.

US can print USD to repay its debt. Can Germany print EUR to do the same? I think one of the main reasons Greece is in trouble now is that they cannot devaluate their own currency through printing. You had one of the most trustworthy and stable currencies called German Mark and it disappeared just like that. It's hard to trust such a government.