Gyroscopic Investing

Posted: **Tue Nov 10, 2015 2:16 pm**

Hi all,

as we all know, gold only went to market price fluctuation after 1971, when Bretton Woods broke. As far as i understand, we can not use gold in back simulations because what we have are not market prices, but a stable price with almost all years in CAGR=0. But there are some years like in 1929 were USA went off gold standard during some time, so gold could fluctuate during the worst years, making a PP portfolio look good in terms of years in negative CAGR.

well, but, is why exactly we can not use gold before 1971 to run simulations? because almost all time we had CAGR=0 in nominal terms?

thank you very much.

Posted: **Tue Nov 10, 2015 3:28 pm**

Arturo wrote: Hi all,

as we all know, gold only went to market price fluctuation after 1971, when Bretton Woods broke. As far as i understand, we can not use gold in back simulations because what we have are not market prices, but a stable price with almost all years in CAGR=0. But there are some years like in 1929 were USA went off gold standard during some time, so gold could fluctuate during the worst years, making a PP portfolio look good in terms of years in negative CAGR.

well, but, is why exactly we can not use gold before 1971 to run simulations? because almost all time we had CAGR=0 in nominal terms?

thank you very much.

We own gold, in part, because of its volatility and its correlation to one of the four economic conditions to which the PP is tied.

If we look back to a period when gold not only wasn't volatile, but actually had a zero return, it would not serve any function in the context of a PP-type allocation.

Posted: **Tue Nov 10, 2015 3:29 pm**

You can use it if you want to, but it is meaningless to use the price of something in a prediction of the future when that price is fixed by legal fiat. That is because legal fiat is arbitrary and can change in completely unpredictable ways, so does not serve as any guide to the future.

Gyroscopic Investing

using gold prices in a simulation 1926-2014

using gold prices in a simulation 1926-2014

Re: using gold prices in a simulation 1926-2014

Re: using gold prices in a simulation 1926-2014